The following is an English translation of the Bundesbank's letter to the German Constitutional Court that was published by Handelsblatt. We welcome comments on translation issues and otherwise.
Bundesbank December 21, 2012
Statement to the Federal Constitutional Court of Germany regarding the lawsuits with file reference 2 BvR 1390/12, 2 BvR 1421/12, 2 BvR 1439/12, 2 BvR 1824/12, 2 BvR 6/12
Within the Monetary Union of the European Union, the monetary policy framework is given by the Maastricht Treaty and the legal acts based thereon. The general principle is a stability-oriented monetary policy with the goal of price level stability which is implemented by independent central banks and to whom monetary government financing is prohibited. This reflects the experiences of those central banks which prior to the Monetary Union were independent, and able to ensure monetary stability with a focus on price level stability. The narrow and clearly defined mandate of the central bank system recognizes the particular constellation of the Monetary Union: a community of countries which have assigned responsibility for monetary policy over to the supranational level, but which continue to decide on fiscal and economic policy primarily at a national level, and which deliberately did not enter into a liability or transfer union. Within this scope, the protection of the common monetary policy, from, for example unsound government financing of some member states, is ensured by the exclusion of liability for other member states, the prohibition of monetary government financing as well as the independent role of markets in the evaluation of the solvency of member states of the Monetary Union, which derives from their individual fiscal responsibility. The latter is expressed by the respective risk premia governments incur when borrowing on capital markets.
The financial and economic crisis since 2007 as well as the debt crisis in some member states of the common currency area since 2009 witnessed a considerable enlargement of the range of monetary policy instruments employed, and a strong expansion of the balance sheets of Eurosystem central banks. With these measures, the Eurosystem has made a substantial contribution to the containment of the crisis. The Bundesbank endorsed many of the measures taken. However, the Bundesbank considers some decisions as very problematic, and has also publicly stated its criticism.
Against the background of the arguments and views newly presented during the cases at the Federal Constitutional Court of Germany, the Bundesbank hereby completes its statement. This statement focuses on the purchase of government bonds by the Eurosystem, the TARGET2 balances, and the resulting risks of losses for the federal budget.