Analysis of outright monetary transactions and public sector purchase programmes - legality and economic reasoning

Abstract

The main objective of this study was to establish a doctrine on how the OMT and PSPP can be compatible with the TFEU Article 123, which prohibits monetary financing of Member States by the ECB. The second and third objectives were to briefly examine what legal frameworks are practiced in other countries and assess the economic necessity of such programmes and future prospects. The research unravelled the interpretation methods used by the CJEU and established the sufficient safeguards doctrine. The doctrine has two main principles which cannot be violated in the creation of the particular safeguards, and those safeguards ultimately prevent the breach of the TFEU. Economic research made it clear that excessive indebtedness to fund massive public projects would produce hyperinflation and should be avoided. Analysis of major macroeconomic indicators and technical analysis have produced evidence of likely economic contraction in the medium term.