Germany is allowed to participate – for the time being

The Federal Constitutional Court has decided: Germany may initially participate in the planned EU reconstruction fund in the Corona crisis – even if billions in debts are taken up for it.

By Christoph Kehlbach, ARD legal editors “Next Generation EU”: This is the name that the European Union has given its development fund. After tough negotiations, the EU decided in July 2020 on a new budget of an unprecedented amount. A total of 1.8 trillion euros has been earmarked for the budget up to 2027. A very significant part of this huge amount, more precisely: 750 billion euros, is estimated as corona aid. The money is to be used to cushion the economic consequences of the pandemic in the member states of the EU. They should receive part of the money as grants and another part as loans.

Some of the money is to be borrowed from the financial market

In order to finance this sum, however, the EU broke new ground: The so-called “own funds decision” of December 2020 stipulates that the EU Commission should take on debts on the capital market on behalf of the international community. Up to 750 billion euros should be flushed into the coffers – exactly the amount that is earmarked for the Corona aid fund. The EU then wants to repay the money by the end of the budget period. The member states must, however, agree to this procedure. The EU Commission can therefore only start taking out the loans and making payments once all 27 EU countries have ratified the decision. The Bundestag and Bundesrat cleared the way for this at the end of March. After the new decision from Karlsruhe, the Federal President can now also sign the ratification law.

Urgent motion against German law

A group of economics professors around AfD founder Bernd Lucke wants to prevent German participation in the project. More than 2000 citizens have joined the constitutional complaint. They take the view that the EU should not take out loans. The plaintiffs want the Member States to take on debt on their own responsibility instead of the EU in order to get the consequences of the corona pandemic under control. Because whoever is allowed to spend the money of other countries, so the argument goes, tends to “waste, inefficiency and overuse”. This ultimately leads to a communitisation of the debts, that is, a “debt union”. Germany will therefore be made liable for billions in debts of other countries.

Legal background

From a legal point of view, the question arises time and again in EU projects of this kind whether Germany surrenders essential competencies in the event of participation. Because they must continue to lie with the federal German organs, especially the Bundestag. Parliament should not be overlooked and take the most important decisions on income and expenditure in the German federal budget. The organs of the EU must also act within the scope of their competences. From a constitutional point of view, Germany can only participate under this premise. This is also where the lawsuit against the Corona aid fund begins.

Urgent examination

Because it takes until a final judgment, the Federal Constitutional Court should now decide in an urgent procedure. Karlsruhe first checked whether the lawsuit would later have no chance of success. In this case, however, the judges expressly did not see it that way. It says: The objections “in any case do not make it seem impossible that the authorization of the European Commission to borrow 750 billion euros on the capital market goes beyond the (…) authorization”. The Constitutional Court then summarily examined whether there was an overwhelming probability that the plaintiffs would be right. Specifically, therefore, that the budgetary responsibility of the Bundestag is actually undermined. However, the Federal Constitutional Court does not see this high probability; for example, because Germany itself does not have to be directly liable as a result of the borrowing. Based on this, Karlsruhe looks at the possible consequences: What if the application were accepted – and that turns out to be wrong afterwards? This in turn compares the Constitutional Court with the opposite situation: The application is initially rejected – and that later turns out to be wrong. According to the court, this balancing act is to the detriment of the plaintiffs: a delay in the entry into force of the capital adequacy decision would have serious consequences for the entire EU. The economic objectives would be completely impaired and the necessary impulses undermined. That makes the difference. Today’s decision is considered decisive – also for the further behavior of the other EU states. Approval can now also be expected here.

Consequences of the decision

Four weeks ago, the Federal Constitutional Court temporarily prohibited Federal President Steinmeier from signing the German consent law. He can now do this. Then nothing would actually stand in the way of the EU fund, which is due to start in the summer, from the German side. However, Karlsruhe will of course still give a verdict in the main proceedings. It does not have to be exactly the same as the urgent decision. At several points in the decision it can be inferred that the court has at least “minor stomach aches” with the EU plans. So the matter is not quite decided yet. Az. 2 BvR 547/21