The EU is breaking new ground with the Corona Recovery Fund. Critics see the instrument as crossing the line into a transfer and debt union and are complaining to the constitutional court. Karlsruhe should insist on compliance with the proper legal process.
EU Commission President Ursula von der Leyen: According to Brussels guidelines, the EU states should also use the money from the Corona Fund for better digitization and the fight against climate change.
The EU and its member states are prisoners of the existing treaties. The world is constantly evolving, but legal adjustments have been impossible for years because it requires unanimity. Serious changes to the existing framework are therefore usually made in crises under the motto “Necessity knows no commandment”. There is always a risk, if not an incentive, not to be too particular about the contracts.
Path to transfer and debt union
Innovations are then often introduced under the guise of a one-off exception. However, the past shows that the exception quickly becomes permanent. An example of this is the purchase of government bonds by the European Central Bank (ECB). Former ECB President Mario Draghi initially declared the purchases to be an exceptional monetary policy instrument, but a few years later he described them as a permanent fixture in the ECB’s toolbox. In the meantime, the massive government bond purchases have become indispensable despite inflation well over 8 percent.
A similar development is now threatening the EU recovery fund. Brussels set up this fund of over 750 billion euros to contain and mitigate the serious economic and social effects of the pandemic in the EU countries. Such an instrument has never existed in this form. The Federal Constitutional Court has received several constitutional complaints against the reconstruction fund, which will be heard this week in Karlsruhe.
The Federal Government and Bundestag approved the fund in March 2021. But the plaintiffs see the new instrument as a substantial change in the budget and financial architecture of the EU, locate liability risks for Germany in the three-digit billion range and violate the regulation according to which EU states are not allowed to help each other out of trouble (no-bailout Clause). In addition, the budget sovereignty of the Bundestag is violated, which is why neither the government nor the Bundestag should have approved the law. The critics fear that the EU will cross borders in the direction of a transfer and debt union, especially since the EU is making debts of its own through the fund on a scale that has not existed before.
pooling of liability
The plaintiffs have some good arguments. The Federal Court of Auditors branded the process as the introduction of debt-financed transfers that were not provided for in the EU treaties. In fact, there would be a communitization of debt and liability. Today’s Chancellor Olaf Scholz, who was still Minister of Finance in March 2021, sees the reconstruction fund as a “necessary and overdue step towards European fiscal union”, as he said in the Bundestag at the time. The first funds were paid out in July 2021. They are intended, among other things, for climate protection and digitization. Does that still have something to do with mitigating the consequences of the pandemic?
The example of the Maastricht criteria shows how much individual countries are already fouting about certain provisions of the EU treaties: they were essential for Germany’s approval of the EU treaties and the introduction of the euro. In the meantime, however, hardly any countries are adhering to the guidelines. The strategy that has been used in the EU for years, according to which the end justifies the means, is increasingly leading to a fiscal union. But such serious changes should only be allowed to go hand in hand with ordinary contract changes. Karlsruhe now has the chance to enforce the spirit of the treaties again – the judges should use them.
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