ECB reportedly drafting contingency plan to carry out QE without the Bundesbank
Reuters reports, citing four sources on the matter
The report says that the ECB is working on plans to continue with QE without the Bundesbank, in case the German top court forces the Bundesbank to quit, citing four sources.
In the worst-case scenario, the ECB would likely launch infringement procedures against the Bundesbank if it stops buying bonds under the QE program.
For now, the staff at the ECB are said to describe a scenario in which the Bundesbank is banned from taking part in QE as "unbelievable", with most expecting the legal challenge to be resolved by the Bundesbank itself by demonstrating that QE policy was appropriate.
I'm not sure how things would actually work if the Bundesbank is left out, because other central banks aren't supposed to take on debt by another government. And all things considered, the ECB cannot leave bunds out of its asset purchase program whatsoever.
It is quite unthinkable at the moment to consider either of the two scenarios but if anything, this pushes the EU more to the brink - and even more so, with the continued dispute surrounding the coronavirus recovery fund as well.