FILE PHOTO: German Bundesbank President Jens Weidmann attends the 29th Frankfurt European Banking Congress (EBC) at the Old Opera house in Frankfurt, Germany November 22, 2019. REUTERS/Ralph Orlowski/File Photo

FRANKFURT/BERLIN (Reuters) – Bundesbank chief Jens Weidmann will meet German lawmakers in a closed-door session on Wednesday, as part of efforts to defuse a constitutional crisis that had threatened to upend monetary policy in the 19-nation euro zone.

Germany’s top court ruled earlier this year that lawmakers failed to exercise appropriate control over the Bundesbank, which must quit the European Central Bank’s government bond purchase programme unless it could justify its participation.

The early May ruling threatened to force the euro zone’s biggest central bank to withdraw from a stimulus scheme that is credited with holding up growth before the coronavirus and averting a financial crisis amid the pandemic.

Since that ruling, the ECB has sent a justification of its 2.3 trillion euro Public Sector Purchase Programme to the German government and parliament, which was accepted by Berlin.

The Bundesbank has also agreed to participate in quarterly hearings billed as “monetary dialogue,” modelled after similar meetings held for the ECB President by the European Parliament.

The hearing also comes as the ECB faces a fresh legal challenge after lawmakers for the AfD party last month filed a complaint against the ECB’s Pandemic Emergency Purchase Program (PEPP), claiming that the scheme exceeds the ECB’s mandate.

The 1.35 trillion PEPP was launched earlier this year at the height of the coronavirus crisis to keep borrowing costs down and prevent the pandemic from morphing into a sovereign debt crisis.

Via Reuters Finance