Global Business and Economics Program Senior Fellow Megan Greene writes for Bloomberg Opinion on the battle brewing between the European Central Bank and Germany’s Constitutional Court:

A German court may have just weakened European Central Bank President Mario Draghi’s most potent weapon in the battle to save the euro.

Back in July 2012, Draghi calmed panicked markets with a pledge to do “whatever it takes” to defend the euro and with a program, known as outright monetary transactions, to stabilize interest rates throughout the euro area by buying the bonds of financially distressed governments. The move was a game changer, shifting the crisis in Europe from acute to chronic. European markets have been relatively calm ever since.

There has always, though, been a significant caveat: The German Constitutional Court had to rule on whether the bond-buying program complied with German law, which forbids monetary financing of the budget. Following a closely-watched debate in the court last September, most analysts expected it would offer a “yes, but” ruling that accepted the bond buying was legal, pending a few small revisions to make the Germans feel they had more control.

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