German court says no ruling on ECB's OMT programme this year

(FRANKFURT) - Germany's highest court said Thursday that it does not expect to issue its ruling on the European Central Bank's controversial OMT bond purchase programme this year as originally expected.

"The ruling will not be announced this year," said a spokesman for the Constitutional Court in Karlsruhe.

"It is the court's aim to wrap up the proceedings as soon as possible," the spokesman said, but added: "An exact date has not yet been fixed."

The Constitutional Court has been asked to examine whether the ECB's "big bazooka", or Outright Monetary Transaction (OMT), is compatible with the country's Basic Law.

Ever since the ECB unveiled the scheme to buy up the sovereign debt of the euro area's most debt-wracked members last summer, fears of a break-up of the single currency have indeed receded.

Europe's storm-battered financial markets have enjoyed a period of relative calm, without a single OMT ever being carried out.

Nevertheless, like many of the ECB's emergency anti-crisis measures, the OMT has its critics -- both in the pro-euro and anti-euro camps -- who claim it is unconstitutional.

And the Karlsruhe-based court -- which already threw out similar objections to the eurozone's bailout mechanisms -- turned its attention to the OMT during a two-day hearing in June, during which both executive board member Joerg Asmussen and Bundesbank President Jens Weidmann took the stand.

Berenberg Bank economist Holger Schmieding said that the possibility that the court could "outlaw the OMT programme, or constrain it in such a way as to render it ineffective ... is the single biggest event risk for the eurozone in the near future."

It would leave the ECB without an effective monetary policy, the expert argued.

But Schmieding suggested the decision to delay the ruling until next year "is largely good news: the later it comes, the more time do eurozone countries have to strengthen the market confidence which they have gradually regained over the course of the year."

A negative verdict in the spring of 2014 would probably have less damaging consequences for financial stability and the economy of the eurozone than it would have had in the summer of 2013, Schmieding suggested.

He said it was not clear whether the timing of the verdict is linked to the fact that Germany currently has only a caretaker government following the general elections in September.

"But the fact that the court takes its time carries some implicit warning: the court does not see this as an easy case," Schmieding said.