Legal uncertainties surrounding the OMT are likely to persist

As expected, the final ruling of the European Court of Justice (ECJ) states that the ECB's OMT programme is compatible with EU law. As previously expressed in the opinion of the Advocate General, the court points out the need for the ECB to allow for sufficient time between primary issuance of bonds and purchases on the secondary market, while making no prior announcements concerning its intended purchases and volumes. 

The wording of the press release clearly shows the ECJ stamping its authority on matters of EU law, expecting now that the German Federal Constitutional Court (GFCC) will conclude the German case against the OMT in accordance with the ECJ's ruling. Given the highly critical tone of the GFCC as it referred the case to the ECJ for its opinion, we are not convinced this fully will be the case. With the GFCC's jurisdiction limited it will not be able to stop the ECB's OMT programme, but we still expect it to be able to set conditions for the German authorities' participation in OMT when it delivers its final ruling later this year or early next, notes Societe Generale 

The fact that the ECB's QE programme includes limits on risk sharing shows that legal concerns over loss sharing have already weighed in on policy, and further uncertainty could make it difficult for the ECB to make OMT operational. In sum, while the use of OMT is unlikely in the near term, especially with the ECB's QE programme in place, the legal uncertainties surrounding the OMT are likely to persist, making it more difficult for the ECB to finalise the legal acts for OMT, and thus making it less likely to ever be used.