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German judges refer ECB lawsuit to European court

[FRANKFURT] Germany's top court said Tuesday it had referred a lawsuit against the European Central Bank's (ECB) multi-billion-euro bond-buying scheme to the European Court of Justice, saying the bank may have overstepped its mandate.

The judges at the Constitutional Court in Karlsruhe said they saw "significant reasons" to believe the ECB exceeded its monetary policy mandate when it began buying government debt on a large scale in 2015 to boost the eurozone recovery.

"It is doubtful whether the (bond-buying) decision is compatible with the prohibition of monetary financing," the judges said in a statement.

But they declined to make a ruling and kicked the case to the EU's highest court instead, asking it to make an expedited ruling on the matter.

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The legal challenge was filed by a group of German politicians, backed by more than 1,700 plaintiffs, who want the country's Bundesbank to withdraw from a programme they argue amounts to the illegal financing of debt-laden eurozone countries.

The 2.3 trillion-euro (S$3.69 trillion) asset-purchasing programme sees the ECB buy up billions of euros in government and corporate bonds each month in a bid to pump cash into the economy and drive up spending and investment.

The so-called "quantitative easing" scheme, due to run at least until the end of 2017, is part of a raft of unusual measures the ECB has taken to revive the euro economy, alongside low interest rates and cheap loans to banks.

But Germans have been among the loudest critics of the stimulus measures.

They object to what they see as printed money being lavished on indebted member states while citizens' savings are being squeezed by record-low interest rates.

The ECB said it "took note" of the German court's decision.

"The extended asset purchase programme is in our opinion fully within our mandate. That is ultimately for the European Court of Justice to assess," it said in a statement.

A similar legal challenge was quashed by the Karlsruhe court last year when it ruled that another ECB bond-buying tool, known as Outright Monetary Transactions (OMT), was legal under Germany's constitution.

The OMT scheme was designed as a crisis-fighting tool and has never actually been used.