What's going on?

You want the truth? Sure, you can probably handle the truth: German courts ruled on Tuesday that the European Central Bank�s (ECB�s) economy-boosting quantitative easing program might be unconstitutional.

What does this mean?

Quantitative easing (QE) is when a central bank buys government bonds from the market and, in doing so, puts cash to work doing all sorts of productive things for the economy. It�s something the ECB�s been doing on and off since 2015 � and as of last year, it�s been very much on.

German courts don�t think the ECB�s fully considered the wider effects of QE on the economy � namely on shareholders, renters, and insurance buyers � and reckon its program mightn�t therefore be �proportionate� to its economies� relative sizes. And that would be a breach of European Union rules. The ECB�s now got three months to convince Germany that its bond-buying is justified, as well as to win over the support of the eurozone�s largest economy.

Why should I care?

For markets: The short arm of the law.
Faced with potential disruptions to eurozone support programs, investors shied away from the euro in favor of other currencies. Its value fell almost 1% on Tuesday, and might�ve dropped even more if the ECB�s coronavirus-specific support had been included in the German ruling too.


The bigger picture: Lean on Germany, when the ECB�s not strong.
When the ECB enacts QE, it does so with the help of individual eurozone countries� central banks buying up bonds on its behalf. But if the German court isn�t happy with the ECB�s response and things escalate, the country�s own central bank might be forced to halt its support � which is the most substantial of any European country�s. And if that happens, the ECB will likely struggle to buy as much as it was targeting, making the program even less effective than it�s already been.