Unsuccessful applications for an order of execution relating to the judgment of the Second Senate on the ECB’s asset purchase programme PSPP

Press Release No. 38/2021 of 18 May 2021

Order of 29 April 2021
2 BvR 1651/15, 2 BvR 2006/15

In a decision published today, the Second Senate of the Federal Constitutional Court dismissed two applications for an order of execution (§ 35 of the Federal Constitutional Court Act, Bundesverfassungsgerichtsgesetz – BVerfGG) that had been lodged following the Court’s judgment of 5 May 2020 on the Public Sector Purchase Programme (PSPP), a programme of the European Central Bank (ECB) for the purchase of public sector securities on the secondary markets.

By judgment of 5 May 2020, the Second Senate of the Federal Constitutional Court had held that the Federal Government – and in relation to the applicants in proceedings I. the Bundestag – had violated the applicants’ right [to democratic self-determination] derived from Art. 38(1) first sentence of the Basic Law (Grundgesetz – GG) in conjunction with Art. 20(1) and (2) GG and Art. 79(3) GG by failing to take suitable steps countering the ECB’s failure to assess and substantiate that the PSPP satisfies the principle of proportionality [under Art. 5(1) second sentence and (4) TEU and therefore the principle of conferral]. The judgment obliged the Federal Government and the Bundestag, in particular, to take steps at their disposal to ensure that the ECB will conduct the necessary proportionality assessment. The applicants contend that the ECB has yet to satisfy the substantive requirements arising from the judgment.

The applications are inadmissible. They exceed the procedurally permissible scope of an order of execution under § 35 BVerfGG, given that the orders sought would go beyond the points of fact and law decided by the Court in the aforementioned judgment. In any case, the applications are also unfounded given that the Federal Government and the Bundestag substantially addressed and appraised the monetary policy decisions taken by the ECB Governing Council following the judgment of 5 May 2020, including the proportionality assessment conducted and substantiated by the ECB in its decisions of 3-4 June 2020 in that regard. The Federal Government and the Bundestag enjoy a wide margin of appreciation, assessment and manoeuvre in this context and it was not for the Court to decide in the present case whether the ECB’s proportionality assessment satisfies the substantive requirements deriving from Art. 5(1) second sentence and Art. 5(4) TEU in every respect.

Facts of the case:

The judgment of 5 May 2020 imposed on the Federal Government and the Bundestag an obligation to take suitable action against the PSPP to the extent that the ECB had failed to demonstrate the programme’s proportionality, which was why the programme had been qualified as an ultra vires act. The Court had further held that, following a transitional period of no more than three months, the Bundesbank would no longer be allowed to participate in the implementation and execution of the PSPP, unless the ECB Governing Council adopted a new decision that demonstrates, in a comprehensible manner, that the monetary policy objectives pursued by the PSPP are not disproportionate to the economic and fiscal policy effects resulting from the programme. On the same condition, the Bundesbank was called upon to ensure that the bonds already purchased under the PSPP and held in its portfolio were sold based on a strategy coordinated with the European System of Central Banks (ESCB).

In its monetary policy meeting of 3-4 June 2020, the ECB Governing Council inter alia adopted two decisions concerning the proportionality of the PSPP. On 26 June 2020, the Bundesbank handed over several ECB documents to the Federal Ministry of Finance, some of which were classified; these documents were forwarded to the Bundestag and made available to its members for inspection at the parliamentary Secret Records Office. On 2 July 2020, the Bundestag adopted [with a broad majority] a resolution declaring that the proportionality assessment conducted by the ECB Governing Council satisfied the requirements set forth in the Court’s judgment of 5 May 2020.

With their application for an order of execution, the applicants in proceedings I. seek, in particular, to compel the Federal Government and the Bundestag to demonstrate if and how they remedied the violation of the applicants’ right under Art. 38 (1) first sentence GG identified in the judgment of 5 May 2020 and, to that end, allow them access to the non-public documents provided by the ECB.

The applicant in proceedings II. seeks, inter alia, a declaration that the Bundestag and the Federal Government remain obliged to take measures in order to ensure that the ECB conducts and substantiates, in a comprehensible manner, a proportionality assessment that satisfies the requirements set forth in the judgment of 5 May 2020, and that the Federal Government is obliged to take action in order to ensure that the Bundesbank refrains from further participating in the execution of the PSPP.

Key considerations of the Senate:

The applications are inadmissible.

I. An order of execution pursuant to § 35 BVerfGG serves to give effect to the Federal Constitutional Court’s findings on the law and to bring about compliance with the underlying decision on the merits. As an ancillary order to the decision on the merits, an order of execution is only permissible within the limits set by that decision’s operative part and by the reasons on which the decision rests. Orders of execution cannot therefore address measures taken after the Federal Constitutional Court rendered a decision on the merits. If orders of execution were to allow a review of such measures, they would require a legal analysis of the new situation under constitutional law and would thus modify and expand the original decision on the merits. This holds true not only with regard to new legislation adopted following the decision on the merits but applies accordingly with regard to all subsequent changes to factual and legal circumstances effected by acts of public authority or other measures taken by the state organs addressed in the judgment pronounced by the Court.

II. The applications seek procedurally impermissible relief.

The applications (indirectly) seek a declaration that the measures taken by the Federal Government and the Bundestag in response to and in execution of the judgment of 5 May 2020 violate constitutional law. This would require a constitutional review of subsequent measures, including an assessment of new legal circumstances, as the measures in question were all taken after the judgment was pronounced and thus could not be taken into account by the Court in its decision on the merits. The same holds true insofar as the applicants, by extension, seek with their (procedurally impermissible) application to gain access to non-public ECB documents that were shared with the Federal Government and the Bundestag.

III. The applications are in any case unfounded.

1. Following the judgment of 5 May 2020, the Federal Government and the Bundestag, in cooperation with the ECB, have taken measures to implement the judgment. In principle, the constitutional organs decide autonomously how to remedy a violation of rights objected to by the Federal Constitutional Court; in this respect, they have a broad margin of appreciation, assessment and manoeuvre. This margin would only be exceeded if no action were taken at all, if legislative and other measures taken were evidently unsuitable or completely inadequate, or if they fell significantly short of achieving the aim of the protection.

2. It was neither demonstrated by the applicants nor is it otherwise ascertainable that the measures taken by the Federal Government and the Bundestag in response to the judgment of 5 May 2020, which were in part carried out with the assistance of the Bundesbank and in cooperation with the ECB Governing Council, fell short of these requirements.

a) Shortly after the judgment of 5 May 2020 was pronounced, the Finance Committee of the Bundestag held non-public discussions, and various other parliamentary committees held exchanges with the President of the Bundesbank on the topic of monetary policy. The Budget Committee received a communication from the Federal Government on the consequences and the implementation of the judgment. Moreover, the Bundestag plenary held a debate on matters of topical interest (Aktuelle Stunde) while the Bundestag Committee on European Union Affairs held a public hearing on this matter. The Bundestag’s Research Services provided an analysis of the PSPP’s compatibility with EU law and issued additional information briefs on the monetary policy decisions taken by the ECB Governing Council on 3-4 June 2020.

b) In its meeting of 3-4 June 2020, the ECB Governing Council inter alia adopted two decisions that concerned the proportionality of the PSPP. In that meeting, in addition to appraising the costs and benefits of asset purchases, the ECB Governing Council discussed not only the potential interactions between monetary policy and fiscal policy but also the risk of fiscal dominance and the safeguards put in place to create incentives for sound fiscal policies. On this basis, the ECB Governing Council concluded that, in overall macroeconomic terms, asset purchases had made a very significant positive contribution to both economic growth and inflation in the euro area.

c) After reviewing the documents received from the ECB, the Federal Government and the Bundestag reached the conclusion that the ECB, by conducting a proportionality assessment, has remedied the shortcomings identified in the judgment of 5 May 2020 regarding the order of competences, thereby satisfying the requirements arising from that judgment. The plenary debate held on 2 July 2020 demonstrates that the Bundestag has substantively addressed the requirements set forth in the judgment of 5 May 2020. While differing views were voiced by different parliamentary groups and individual members of the Bundestag, the majority of the Bundestag concluded that the actual effects the PSPP could potentially have on Member State finances, private households, savings and borrowing, the banking sector and business had been appraised in the decisions adopted by the ECB Governing Council on 3-4 June 2020, and in the discussion that had preceded those decisions, and that these effects had been weighed and balanced against the PSPP’s objective of increasing inflation rates to levels below, but close to, 2%.

3. The Federal Government and the Bundestag therefore neither failed to take any action at all nor were the measures taken by both organs manifestly inadequate or completely insufficient to meet the obligation, set forth in the judgment of 5 May 2020, to ensure a proportionality assessment of the PSPP.