EU lawyer approves ECB bond-buying programme

A top European Union lawyer has said that the European Central Bank’s planned bond-buying programme is legal.

Advocate General Cruz Villalon said that the ECB’s Outright Monetary Transactions (OMT) programme is compatible, in principle, with EU law.

He also said that if the programme is implemented, its compatibility will depend on certain conditions being met.

The bond-buying is aimed at avoiding a break-up of the euro, but has faced a legal challenge from Germany.

The OMT plan, announced in 2012 has never been put into practice, although it has helped restore confidence in Eurozone markets.

However, with the Eurozone facing the threat of deflation and recession, there is increasing pressure on the ECB to start a separate programme of quantitative easing (QE), which would involve starting a bond-buying operation similar to OMT.

Jonathan Loynes, chief European economist at Capital Economics, said: “Overall, then, the final hurdle to quantitative easing appears to have been cleared.

“But given the ECB’s natural caution, Germany’s objections and the limited effects of QE in other countries, it would be hopeful to expect it to transform the Eurozone’s economic outlook.”