The judgment is a victory for democracy, the rule of law, and economic reason.

The constitutional complaint against the European Central Bank's (ECB) bond purchasing program has ended with a surprising and sensational success. The initial situation was extremely unfavorable, as the European Court of Justice (ECJ) had ruled against the plaintiffs, and the Federal Constitutional Court (BVerfG) had always adhered to the jurisprudence of the ECJ in matters of European law.
The PSPP program now encompasses a volume of 2.6 trillion euros.

The BVerfG has determined:

(free summary of the judgment with commentary)

1. The European Court of Justice (ECJ) ruled beyond its competences

The BVerfG accused the ECJ of acting “ultra vires,” meaning it ruled outside its competences! Its (previous) judgment on the bond purchasing program is deemed “incomprehensible” and methodologically and substantively so deficient that it no longer falls within the scope of the European Treaties, and thus the Federal Constitutional Court is not bound by the jurisprudence of the ECJ.

2. The ECB has exceeded its competences

The ECB has also acted “ultra vires” when it launched the PSPP bond purchasing program. The ECB overstepped its competences or wrongfully assumed the right to determine its own competences, as it did not examine whether the bond purchases would bring about disproportionately severe economic and fiscal damages.
In this context, the BVerfG specifically pointed out the following economic and fiscal impacts of the PSPP that need to be examined, as they interfere with the competences of the member states: Reduced savings and other asset incomes, potential bubble formation in the real estate sector, significantly rising rental burdens, the continued existence of non-competitive firms, advantageous financing conditions for financial institutions, and favorable financing terms for states with potential incentives for unsound fiscal policies. These negative consequences of bond purchases must be weighed against what the ECB intends to achieve: An inflation rate of just under 2%.

3. The BVerfG has defined prohibited monetary state financing

• The purchase limits of 33% per issuance and issuer must not be exceeded

• The distribution of bond purchases among the Eurozone member states must occur in proportion to the capital key of the ECB.
  (Note: these two criteria are not fulfilled in the Corona purchase program PEPP and are therefore presumably unconstitutional).

• A concrete exit perspective must be in place. The ECB must specify in the PSPP decision, based on concrete criteria, when the acquired bond holdings will be sold again. The BVerfG has clarified that holding them until maturity must only be an exception and not the rule. This deprives the currently practiced indefinite reinvestment strategy by the ECB (which represents a permanent monetary state financing) of its basis. Furthermore, the holdings must be actively sold and not only reduced at the pace at which bonds are due for repayment.
  
  

4. The Bundestag and Federal Government have failed in their oversight duties

The plaintiffs have been violated in their fundamental right to democracy because the Federal Government and Bundestag failed to ensure that the ECB only does what it is authorized to do by democratically adopted resolutions!

Consequences imposed by the BVerfG

The ECB must provide a justification for the bond purchasing program within 3 months that meets the aforementioned criteria; otherwise, the Bundesbank may no longer participate in the purchasing program.

Note: The ECB will find it challenging to provide a convincing justification for the continuation of the PSPP. This is especially true as it is no longer possible for the ECB to determine itself that it has provided a convincing justification. Rather, the justification for the Bundestag and Federal Government must be so convincing that they have the certainty of not incurring another reprimand from the Federal Constitutional Court due to a violation of fundamental rights.

Judgment of the BVerfG from May 5, 2020
2 BvR 859/15, 2 BvR 980/16, 2 BvR 2006/15, 2 BvR 1651/15

Judgment of the ECJ from December 11, 2018
https://buendnis-buergerwille.de/wp-content/uploads/2020/06/2018-12-Entscheidung-EuGH.pdf

Constitutional complaint from September 3, 2015
https://buendnis-buergerwille.de/wp-content/uploads/2020/06/Verfassungsbeschwerde-EZB.pdf