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                 European Court Upholds Key Anti-crisis Program

   by Associated Press

   The European Court of Justice has delivered a ruling strengthening the
   European Central Bank's (ECB) hand in intervening in financial
   markets -- backing that could come in handy amid fears Greece will
   default on its debts and possibly leave the 19-country euro currency
   union.

   In a decision Tuesday in Luxembourg, the court upheld the ECB's 2012
   offer to buy the bonds of countries whose governments face excessive
   market borrowing costs. The offer has helped reassure markets, even
   though no country has used it. High borrowing costs can push a country
   to need a bailout package of rescue loans, as happened with Greece,
   Portugal and Ireland.

   The offer was challenged by a conservative German lawmaker and others
   who argue the ECB overstepped its legal powers and strayed into using
   its monetary powers to lend financial aid to governments.

   The court disagreed, saying the bond-purchase offer "falls within
   monetary policy and within the powers" of the European system of
   central banks with the ECB at its head. Top ECB official Yves Mersch
   said the bank was "quite satisfied" with the ruling and said it
   confirmed the bank was "erring on the side of prudence" in using its
   powers.

   The ECB, based in Frankfurt, Germany, serves as the chief monetary
   authority for the countries that use the euro, and has played a key
   role in fighting their crisis over high government debt. The bond
   purchase offer was part of ECB head Mario Draghi's 2012 promise to do
   "whatever it takes" to save the euro.

   The bank has been constrained at times by a narrow legal mandate
   requiring it to fight inflation first, and only then look at
   stimulating growth and job creation. It has significantly expanded its
   role during the debt crisis, taking over banking supervision with the
   approval of EU governments and launching a broad program of monetary
   stimulus.

   Christoph Schalast, professor of business and European law at the
   Frankfurt School of Finance & Management, said the decision bolstered
   the bank's legal freedom of action.

   "It's a victory for the ECB, and it strengthens the discretionary
   powers of the ECB, which is very important in my view in the current
   crisis with Greece, that the ECB can `do whatever it takes,' to quote
   Draghi," Schalast said.

   Eurozone governments are in difficult talks with Greece over the
   conditions under which Athens would get more bailout loans. While the
   talks drag on, the central bank has kept the Greek banking system going
   by permitting banks to draw emergency central bank credit. It has also
   allowed the banks to lend a limited amount of money to the Greek
   government by purchasing short-term treasury bills.

   The ECB's decisions to continue such support is crucial. Analysts
   believe Draghi wants to give elected leaders every opportunity to cut a
   deal. If they can't, however, the bank could be in the position of
   deciding whether to pull the plug on Greece's finances.

   Analyst Tobias Ruhl at UniCredit Research said the ruling also
   buttresses the legal support for the ECB's current, separate program to
   pump 1.1 trillion euros of monetary stimulus into the economy through
   purchases of government and corporate bonds. The practice is known as
   quantitative easing, or QE.

   He noted the decision placed no additional limits on what the bank can
   do in operating in financial markets, "providing legal tailwind to the
   QE program, as well."
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   isis-program/2824443.html

References

   1. http://www.voanews.com/content/ap-european-court-upholds-key-anti-crisis-program/2824443.html