– by Ursula Knapp and Christian Kramer
Karlsruhe/Berlin (Reuters) – The joint debts in the EU for the Corona reconstruction fund do not violate the Basic Law.
That was the verdict of the Federal Constitutional Court on Tuesday, after the green light had already been given for the 750 billion euro financial pot. However, the court emphasized the exceptional character. The federal government saw itself as confirmed by the verdict. “It’s not a blueprint for future programs,” said State Secretary Florian Toncar, who represented the Federal Ministry of Finance in Karlsruhe. The plaintiffs, including former AfD politician Bernd Lucke, were disappointed.
The reconstruction fund was intended to secure economic recovery after the Corona crisis, which led to an economic slump in 2020. Since then, the economy has also recovered, but much less than originally thought, because the energy crisis resulting from the Russian attack on Ukraine is now affecting numerous companies. Toncar said the government will evaluate the verdict in detail, which will take time. The corona fund that was set up was correct and permissible during the pandemic. The funds must now be used sensibly. “It’s not an everyday instrument.” Rather, it is a one-time action, according to the parliamentary state secretary. In some parts of the European Union there are already demands to use the means to combat the energy crisis or to set up a new pool of joint debts. Federal Finance Minister Christian Lindner (FDP) vehemently rejects the latter.
With the verdict, the judges rejected two constitutional complaints. The decision was made by a six-to-one vote. Constitutional judge Peter Müller gave a dissenting opinion. (AZ: 2 BvR 547/21 and 2 BvR 798/21)
Lucke said it was at least positive that the court emphasized the strict exceptional character. It has now also been established that the EU has no general fault-related competence. “This decision from Karlsruhe strengthens those who want to finance more European tasks through debt in the future,” commented Friedrich Heinemann from the Mannheim-based economic research institute ZEW. “With this tailwind from Karlsruhe, the pressure from Brussels on the federal government will now increase to clear the way for debt financing of new EU programs.”
GREENS DEMAND MORE EU POTS FOR NEW CRISES
The Greens immediately demanded this: “It is important that Europe does not remain with the status quo, but learns from the corona pandemic and also acts in other crises with a common financial policy and invests in the future,” said the budget spokesman for the Greens. Bundestag faction, Sven-Christian Kindler. “The climate crisis is getting worse and worse and the consequences of the Russian war of aggression are enormous for the European economies. Global competition with China and the USA, which are massively restructuring their economies with loans, is forcing the EU to invest significantly more.” The money from the Corona pot is actually intended primarily for greater digitization and more environmental protection.
With the so-called own funds resolution, the EU Commission was authorized to borrow up to 750 billion euros on the capital markets. In March 2021, the CDU/CSU, SPD, Greens and FDP agreed. The distribution began in June 2021. The money will be distributed to the member states according to quotas. 360 billion euros are issued as loans, repayable by 2058. 390 billion are grants that the member states do not have to repay.
“In its justification, the majority of the Second Senate rules out the possibility that Germany could be liable in the long term for non-payment of contributions by other member states,” said ZEW economist Heinemann. This view is based on the optimistic assumption that there will be no insolvencies in the EU until the fund is finally repaid in 2058. “Numerous analyzes show, however, that a number of EU countries have a serious problem with their debt sustainability in the medium term.”
The plaintiffs see the EU as exceeding its powers by taking on debt. The court emphasized that the EU was not expressly authorized under the treaties to take out loans on the capital markets. However, there is no absolute ban. Rather, under certain conditions, borrowing is “excep- tionally considered”. The funds would have to be used exclusively for a specific purpose, and borrowing would have to be limited in time and amount. Furthermore, the loans should not exceed the EU’s own budget. “This is the case here,” the verdict said.
Nevertheless, the judges also expressed doubts that the loans would all be used in connection with the pandemic. Because at least 37 percent would have to be spent on climate protection. In his dissenting opinion, constitutional judge Müller criticized the decision of the majority as “incomprehensible”. The borrowing represents two-thirds of the EU’s multi-year financial framework. It is aimed at a “fundamental change in the financial architecture of the European Union,” according to the former Prime Minister of Saarland.
(Edited by Christian Götz. If you have any questions, please contact our editorial team at [email protected] (for politics and the economy) or [email protected] (for companies and markets)