Legal Limits on the ECB’s Actions: Is the PEPP a Bridge too Far?

Abstract

After the global financial crisis of 2008-2009, the role and monetary policy of the European Central Bank (ECB) underwent a profound evolution, with the turning point being the possibility for the institution itself to intervene on secondary markets to purchase government bonds of eurozone member states. However, this evolution took place within the legal framework established by the EU Treaties, which remained unchanged. The fact that these changes occurred within an unchanged legal context raised a fundamental issue: there was a need to verify whether these changes were compatible with the legal limits on the actions of the ECB under the EU Treaties. It is for this reason that, between 2012 and 2018, the Court of Justice of the European Union (CJEU) developed a case law aimed at (i) verifying whether the new monetary policy tools were compatible with the provisions of the EU Treaties and (ii) defining the legal limits of ECB intervention on secondary markets. Against this backdrop, this article analyses the extent to which the ECB’s intervention on secondary markets during the COVID-19 crisis through the Pandemic Emergency Purchasing Programme (PEPP) complies with the criteria established by this case law in relation to Article 123 TFEU. To this end, the article first reviews the role and mandate of the ECB as defined by the EU Treaties. It then analyses both the evolution of the ECB’s role over the years and the jurisprudence developed by the CJEU in relation to the legal limits on the ECB’s actions, particularly in relation to the prohibition of monetary financing established by Article 123 TFEU. Finally, the article develops an analysis intended to verify whether PEPP can be considered compatible with the legal limits defined by the abovementioned jurisprudence of the CJEU.