Euro Zone News

How to deal with a problem like Karlsruhe

Europe’s recovery from the pandemic is facing yet another setback. Germany’s constitutional court has moved to block ratification of the EU recovery fund, ordering the country’s president not to sign the agreement into law until the court has examined a motion brought by a handful of Eurosceptics. This is both an unwelcome roadblock to recovery efforts and a reminder of the role played by the court as a persistent impediment to eurozone reform efforts.

After the fiasco of its vaccine procurement and rollout, the EU can ill-afford a pause in deploying the fund. A hard-fought agreement on joint borrowing last year was a sign that the bloc had learnt from previous crises and was prepared to act fast and big (at least by its own standards). The hold-up, too, makes it all the more important that individual EU governments take their own additional measures — a third wave of infections as well as less fiscal support means the bloc’s recovery is likely to lag much of the rest of the rich world.

Judicial review is a legitimate recourse in any constitutional democracy. But the court, located in Karlsruhe, subscribes to an idiosyncratic view that it, rather than the European Court of Justice, has the final word on interpreting EU law. Neither does Germany’s highest court accept that EU law has primacy.

This anomalous viewpoint turned into a crisis last year when the court declared an ECJ ruling upholding the legality of bond-buying by the European Central Bank as beyond the jurisdiction of the EU’s highest court. That crisis was eventually defused by the government requesting clarification from Germany’s central bank justifying the processes behind the asset purchase scheme. Having taken legal principle to extraordinary heights, the court was apparently satisfied with a bureaucratic fudge. 

However, the underlying problem for the EU — the German court’s defiance of the ECJ’s primacy — was never tackled. The European Commission should have issued infringement proceedings against Berlin. It did not do so, understandably fearing it could spark a political crisis. Brussels’s inaction has done nothing to dissuade the German court from acting on flimsy appeals by Eurosceptic campaigners.

Ratification of the recovery fund was backed by an overwhelming majority of members of the German parliament last week. The campaigners who brought the case — including the founder of the far right Alternative für Deutschland party — argued that the EU’s treaties do not allow for joint-borrowing. However, the EU’s own resources decision, the legal foundation for the fund, is also the basis for all the bloc’s budgets. The EU has borrowed before, just not this much.

The Karlsruhe court has in the past 20 years taken extreme interpretations of the right to vote and the principle of national budgetary sovereignty — two unamendable tenets of the German constitution — while downplaying other elements of the constitution, allowing for delegation of powers to the EU for the purposes of EU integration. The court’s doctrinal thinking is far outside the European mainstream.

The problem cannot be easily resolved given the difficulty of changing the constitution. The best hope might be a changing of the guard on the court itself and the eventual appointment of judges with a more balanced assessment of the constitution and how to reconcile it with Germany’s obligations to the EU. It will require a profound and vigorous debate in Germany’s judicial establishment. Germany’s politicians should encourage it.

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