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Top EU lawyer says ECB bond-buying programme legal
[LUXEMBOURG] A senior advisor to the EU's top court found Wednesday that a hugely controversial bond-buying programme by the European Central Bank is legal, just days before the ECB is widely expected to begin buying government debt.
Advocate General Cruz Villalon at the European Court of Justice said in an opinion that an earlier ECB programme was "in principle" in accordance with European treaties, after a legal challenge by German politicians and academics who believe the central bank was over-stepping its powers.
The ECJ usually follows the opinion of the Advocate General and Wednesday's finding will be widely interpreted as a green light to ECB chief Mario Draghi to adopt quantitative easing or 'QE', the controversial policy widely credited with boosting the US and British economies, but is firmly opposed by Germany.
"Overall, then, the final hurdle to quantitative easing appears to have been cleared," said Jonathan Lyons, chief European economist at Capital Economics.
Villalon was commenting on Draghi's Outright Monetary Transactions programme - under which the central bank can theoretically buy up unlimited amounts of the sovereign debt of crisis-ridden countries.
It was unveiled by Draghi in August 2012 at the height of the eurozone debt crisis when financial market turmoil looked set to bring down the single currency.
While it has never been put into use, its mere existence has proven to be the most effective weapon against the crisis and has largely defused fears of an imminent break-up of the eurozone.
But with deflation in the eurozone looming as the economy falters once again, Draghi said Wednesday the ECB does not have many options left apart from sovereign bond purchases.
Financial markets are betting that the ECB council will announce plans for a programme of some form of QE when it holds its first policy meeting of the year on January 22.