Court eases way for more eurozone stimulus

FRANKFURT, Germany - A legal opinion issued Wednesday by an adviser to the European Union's top court helps clear the way for bigger stimulus measures from the European Central Bank, analysts say.

The opinion from Pedro Cruz Villalon, an advocate general with the European Court of Justice, said that the ECB's offer in 2012 to buy government bonds of troubled countries is legal in principle.

Markets have been watching the case to learn whether the court might impose restrictions that could affect the ECB's plans for a new, larger stimulus program also based on purchases of government bonds. Investors think the central bank may announce such large-scale purchases of government bonds at its Jan. 22 meeting. The new program would aim to foster growth and nudge up inflation.

Jonathan Loynes, chief European economist at Capital Economics in London, said Wednesday's court decision "would seem to clear the path" for a bigger program of bond-buying next week.

Christian Schulz at Berenberg Bank said the decision means "no additional legal hurdles" stand in the way.

The earlier bond purchase program, announced in 2012, helped calm market turmoil that was threatening to break up the euro bloc. The ECB never bought any bonds, but the mere offer reassured markets.

Opponents in Germany, however, challenged the program in court. They say the ECB overstepped its authority and violated a European Union treaty ban on the central bank directly helping governments.

Villalon's opinion is preliminary, before a decision by the court's judges later this year. The court does not have to follow his opinion.

A top ECB official stressed Villalon's finding that the eurozone's chief monetary authority must have "wide discretion" in framing its policies and that courts must exercise "a considerable degree of caution" in reviewing its activity.

ECB executive board member Yves Mersch said that while the opinion was limited to the 2012 bond-buying program, it "clearly states it is the ECB which has sole responsibility for the conception, definition and implementation of monetary policy."