ECB bond-purchasing program unconventional but lawful: EU court

The plan of the European Central Bank (ECB) to purchase government bonds is compatible with EU law, a top adviser to the European Court of Justice said Wednesday.

The controversial Outright Monetary Transactions program, proposed in 2012 by the ECB, is a rescue plan, under which the ECB would buy government bonds from the debt-ridden countries provided that the issuing country had agreed to a fiscal adjustment program.

The bond-buying program, with its legitimacy questioned from time to time, has never been put into use and is only considered as the last resort.

However, with deflation in the euro zone looming as the economy falters once again, Mario Draghi, the president of the ECB, said the ECB may have to enforce the program.

Pedro Cruz Villalon, advocate general of the European Court of Justice, said in a statement that even though the program is an unconventional monetary policy measure, such measure is compatible with EU law and falls under the domain of monetary policy.

But he also noted that such unconventional measures must be used with caution. Although the European Court of Justice lacks the expertise and experience which the ECB has in monetary policy area, the court must weigh carefully when reviewing the ECB's activity. Endi