Transcending Contestation: The outright monetary transactions programme and the constitutionalization and scientization of monetary policy and central banking in the Eurozone

Hjalte Christian Lokdam

Student thesis: Master thesis


This thesis is a case study of the European Central Bank’s (ECB) Outright Monetary Transactions (OMT) programme and its relation to the wider apparatus of central banking in the Eurozone. The OMT was announced at the height of the Euro Crisis in 2012 and sparked a heated public debate. It was also challenged before the German Federal Constitutional Court (GFCC), which referred the case to the European Court of Justice (ECJ) for a preliminary reference. In this thesis I analyse the development of the case and the different interpretations of the programme. In doing so, I will highlight how these relate to underlying understandings and theories about public law and the relationship between monetary policy and the political and economic order. The thesis identifies two main positions on the case: one – the integrationist – sees the programme as a long overdue step towards closer European integration. This position, I argue, reflects Keynesian ideas about the necessity of the organic link between the central bank and the political government. The other – the conservationist – sees the programme as a manifest violation of the legal framework of the Economic and Monetary Union (EMU). This position, in turn, is based on ordoliberal ideas about the necessity of constitutionalizing monetary policy in order to eliminate political discretion to intervene in the economy. Both positions, however, agree that with the promise to conduct OMTs, the ECB, among other things, stepped in as a lender of last resort to sovereigns in the Eurozone and thus transgressed its narrow mandate. The GFCC, closest to the conservationists, found the OMT programme to be outside the EMU framework and thus in violation of the German ‘constitutional identity.’ Contrary to the common wisdom, however, the ECJ ruled that the OMT programme was not in violation of the ECB’s mandate. In the analysis of the justifications for this ruling, I emphasize the dual process of constitutionalizing and scientizing monetary policy and central banking and suggest that this has the effect of rendering both the means and the ends of monetary policy outside of the reach of legitimate political contestation.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
Publication date2016
Number of pages89