Bundesbank president to break taboo and brief German parliament on ECB

Bundesbank president Jens Weidmann will begin quarterly briefings to Bundestag MPs to explain better European Central Bank monetary policy decisions to German politicians – and the public.

Until now such a policy was taboo, given the political independence of Germany’s Frankfurt-based central bank.

But the unorthodox decision is part of a creative response to the May 5th ruling by Germany’s constitutional court, challenging the proportionality of ECB purchase of bond-buying to stabilise the euro.

The Karlsruhe court gave MPs in Berlin, and Angela Merkel’s administration, three months to find out what made the bond-purchases necessary. If not, the court said the Bundesbank must be ordered to withdraw from all such bond-buying programmes.

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Ahead of the first briefing in August, the Bundesbank will pass on next week to the federal government ECB reports justifying bond-buying.

For the German central bank to act as intermediary in this way, in particular on monetary policy it has consistently criticised, makes for a curious division of labour.

But unusual times make for strange alliances, particularly after a ruling seen in my quarters around Europe as an attack on the independent ECB and the European Court of Justice in Luxembourg.

Neither institution is legally answerable to Karlsruhe – or Berlin. But with the Bundesbank as intermediary, Bundestag MPs can secure the information they need on euro crisis bond-buying during their last sitting before the summer break.

Future participation

Otherwise, some fear Germany’s future participation in a newer, €200 billion ECB bond-buying programme launched in response to the Covid-19 pandemic.

In a letter to Bundestag MPs, Dr Weidmann – a former adviser to the chancellor, Dr Merkel – said he was confident the “institutions involved will succeed in finding a solution that meets the federal constitutional court’s specifications but also allows for independent monetary policy”.

Dr Weidmann insisted in the letter that the Bundesbank, which holds a 26 per cent stake in the ECB, is legally beholden only to German law.

If a compromise is not found, the Bundesbank president conceded that his institution, "according to the jurisprudence of the federal constitutional court cannot participate in organs . . . of the European Union. that touch [Germany's] constitutional identity".

Dr Peter Huber, the Karlsruhe judge behind the May decision, accused the bank of acting like a "master of the universe". Instead he told a German newspaper it should "take responsibility in the eyes of the public" to explain how bond-buying is part of its mandate.