This weekend, European Commission President Ursula von der Leyen threatened to sue her native Germany after the latter's Constitutional Court in Karlsruhe had ruled that the European Central Bank's (ECB) stimulus program partially violates national law by disproportionately bulk-buying sovereign bonds, especially those of heavy-indebted countries
BRUSSELS (Pakistan Point News / Sputnik - 12th May, 2020) This weekend, European Commission President Ursula von der Leyen threatened to sue her native Germany after the latter's Constitutional Court in Karlsruhe had ruled that the European Central Bank's (ECB) stimulus program partially violates national law by disproportionately bulk-buying sovereign bonds, especially those of heavy-indebted countries.
In a strong statement on Sunday, von der Leyen said that the court's decision warranted her actions to "safeguard the proper functioning of the Euro system and the Union's legal system." She noted that once the commission finished analyzing the 100-page ruling, it would look into next steps, including "the option of infringement proceedings" against Germany.
She stressed that "that EU law has primacy over national law," and the final word on EU institutions' compliance with law is "always spoken" in the European Court of Justice in Luxembourg and "nowhere else."
The Karlsruhe-based court strongly criticizes the policy of purchasing national treasury bonds by the ECB. It considers that it does not meet the principle of proportionality (Articles 5-1 and 5-4) of the Treaty on European Union: "Under the principle of proportionality, the content and the form of Union action do not go beyond what is necessary to achieve the objectives of the Treaties."
According to the court, the ECB's bond purchasing policy impinges on responsibilities of the German parliament in budgetary matters, as established by the national constitution (Basic Law).
The ECB now has three months to explain its policy and prove that it meets the criterion of proportionality - no more than 33 percent of bonds for a single state and in proportion to the share of that country in the capital of the ECB. Otherwise, the national central bank should stop participating in these public debt purchases, according to the court.
Though the current clash may look like a blow to the EU cohesion, experts doubt that it is the case, saying that this row is actually quite old.
"This open quarrel between the German constitutional court and what some would call 'Brussels' ... over the limits of the competences between the German highest court and the European Court of Justice, is not new. The Karlsruhe Court has already recalled that the Bundestag must have the last word and that the European Union cannot impose obligations, which are not in their delegated tasks," Michel Liegeois, a professor at Belgium's University of Louvain, told Sputnik.
While green-lighting the ratification of the European Stability Mechanism in September 2012, the court in Karlsruhe made a remark that the German parliament must have a veto right, or the last word, over any increase in the nation's contribution to the program in accordance with the constitution, he recalled.
"The German Court obviously does not have the 'European vision' of the judges of the European Court of Luxembourg which, in the name of the need to build Europe, have interpreted treaties in their own way. The Karlsruhe Court takes the treaties at their word and gives words their ordinary meaning, no more, no less," the professor stated.
He, however, expressed belief that Chancellor Angela Merkel and von der Leyen, a former German defense minister, would find a way out of this legal battle.
POLAND, HUNGARY WELCOME GERMANY IN THEIR RANKS
Article 7 of the Treaty on European Union, under which certain rights of a member state can be suspended unless they respect common values, has so far been triggered against Poland and Hungary for "endangering democracy by their Judicial reforms and their public media policies."
A real internal war has since erupted in the EU, with Poland and Hungary mentioned in many official policy documents of the bloc (even the plans to fight COVID-19) as "illiberal" partners, the black sheep of the family so to speak.
There is no surprise that in an interview with Frankfurter Allgemeine, Polish Prime Minister Mateusz Morawiecki immediately welcomed the German court ruling as "one of the most important" in the EU's history and the one showing "that the European Court of Justice does not have unlimited powers."
Hungarian Justice Minister Judit Varga, often attacked by Brussels, has also praised the decision.
Separately, on Tuesday, she expressed her indignation over the European Parliament's plans to hold a debate on the state of the rule of law in her country in light of the latter's COVID-19 emergency legislation. She branded it as "lynching," lambasting the fact that at a time of the pandemic when people are "dying" and losing jobs, the European legislature chooses to discuss Hungary.
Poland and Hungary are not alone in their welcoming the German court ruling. Jerome Riviere, a European Parliament member from France's right-wing National Rally party, believes that it is the first time when "member state judges have clearly stated that the member states decide themselves where the red line is for the EU institutions."
"If the European Commission remains as arrogant as it is now, member states could simply quit the eurozone! The European institutions are unravelling. Despite several Council meetings of the European heads of state, they have not been able to establish an economic plan to answer the coming economic crisis. Europe is paralyzed and the citizens realize that we can be a functioning economic union, but there is no 'European sovereignty,'" he told Sputnik.
Unless the EU agrees on mechanisms to fund its coronavirus recovery plan, Spain, Italy and even Greece may launch own EU exit referendums, which would tear the bloc apart, the lawmaker warned.
IS THE SITUATION AROUND BERLIN-BRUSSELS CLASH THAT BAD?
The legal quarrel indeed comes as the European bloc expects a "recession of historic proportions" this year, with a 7 to 15 percent drop in economic output, dependent on the member state.
Spanish Deputy Prime Minister Pablo Iglesias has even warned that the EU may not survive the coronavirus pandemic. The German ruling in Karlsruhe only exacerbates the divisions between the north and south.
But the fact that von der Leyen, a member of Merkel's Christian Democratic Union, was a German federal minister from 2005 until she became the head of the European Commission in December 2019, gives hope that she and Merkel will find a way out.
The judges of Karlsruhe are independent from political power, but in the end, it is the Bundestag that will decide on whether the work of the ECB is acceptable to Germany, and the coalition of the CDU/CSU and the Social Democratic Party has a comfortable majority there.
Chancellor Merkel said on Monday that the dispute over the court's judgment was "solvable," thereby mitigating the effect of the clash.
Italy's Five Star Movement party, too, believes the current row will unlikely result in a crisis of relations between Berlin and Brussels.
"We consider this row as an internal German discussion. They need to figure out in Germany how the courts can deal with European law. This will not become a major crisis. The ECB is presently still buying sovereign bonds, which shows that their policy is right and will not change. The ECB should not be silenced," M5S spokesman Davide D'Antoni told Sputnik.
Germany, he went on, should decide if "they want a strong Europe in the world or a strong Germany on its local turf."
"The coronacrisis is a big opportunity to make Europe stronger. Public debt is increasing everywhere in Europe, now is the time to give a major boost to the economy with grants, not loans that would accumulate and have to be repaid later. We need Eurobonds of some kind. In a difficult negotiation, it is always like that, and a compromise is always found. That is why the Italian government has chosen a low profile. We will come up with counter-proposals, once the Germans have solved their internal issue," he added.
Etienne de Callatay, the chief economist at Orcadia Asset Management in Luxembourg, told Sputnik that the row around the Karlsruhe court ruling is "not positive" for Europe as a bloc, but "not too serious," which has been proved by the reaction at markets, "which have reacted very little."
According to the expert, the disagreements around the stimulus program show that "the euro covers very heterogeneous territories, which requires mutualisation, budgetary transfers, mobility of people, and we are not there (yet)."
The end of the euro would, however, "cost the Germans at least as much as the Italians." As for the debt linked to the coronavirus crisis, it "will never be repaid but would be cancelled, would be financed in the very long term at (almost) zero rate," he concluded.
