Karlsruhe studies the EU Corona Fund – Economy around the world

The coronation pandemic has placed many economic demands on Germany and other EU countries. A huge injection of cash should help them quickly get back on their feet and emerge stronger from the crisis.

The only problem: critics believe the Bundestag should never have agreed to German participation. The Federal Constitutional Court has been hearing their complaints since Tuesday.

Why it is?

It is a development program officially named “Next Generation EU”. In December 2020, heads of state and government authorized the European Commission to raise up to EUR 750 billion on capital markets. As this sum is based on 2018 prices, it is now de facto almost EUR 807 billion. Countries agreed that the effects of the crisis could only be dealt with in this “emergency response” manner.

How is it supposed to work in detail?

Almost half of the money is transferred in the form of a loan, and a slightly smaller amount is allocated to scholarships. The remainder is paid through programs in the EU budget. The debt is to be repaid from the EU budget for decades – by the end of 2058 at the latest. The funding will be used mainly by projects promoting a more environmentally friendly and digital economy. Each country had to present a plan with specific projects.

How will Germany and other countries benefit?

The largest amounts go to particularly affected countries such as Italy and Spain. Germany expected subsidies of almost EUR 26 billion net. 90 percent of this amount should go to climate projects and digital transformation, such as hydrogen research, climate-friendly mobility and a more digitally-oriented education system. The purchase of electric cars, buses and trains is to be promoted, as well as an extensive charging infrastructure.

Why is there criticism?

This is the first time that the European Commission has accepted as large sums as a common debt – and the EU countries are jointly and severally liable for this. In March 2021, the Federal Court of Auditors spoke of “a breakthrough for the European financial architecture” and warned of threats to the federal budget. Germany is expected to be the largest net contributor with around € 65 billion. If countries no longer meet their payment obligations, the rest will have to take responsibility for their share of the EU budget.

What financial risk is Germany taking?

The assumptions are very different here: claimants in Karlsruhe warn that the share of commitments for the whole period to 2058 will be between 850 and 1,000 billion euros. In its statement to the court, the Bundestag calls these “numerical operations” completely unfounded – the maximum additional burden is EUR 21.75 billion per year. The federal government sees it the same way: plaintiffs have only reached high sums by simply adding up the annual risk for individual households. The very low probability of occurrence is not taken into account.

What exactly is negotiated?

The lawsuits are directed against the law by which the Bundestag approved the participation of Germany. Out of five unresolved constitutional complaints, the Senate II selected two for consideration. One of them comes from an alliance around former AfD founder Bernd Lucke and is supported by nearly 2,300 people. The second was made by entrepreneur Heinrich Weiss. Several CDU MPs in Karlsruhe also complained about the reconstruction fund. There is also an organ lawsuit by the AfD parliamentary group.

What legal questions play a role?

The essence of the Basic Law is that the Bundestag decides all relevant income and expenses. In addition, citizens have the right to ensure that all EU bodies only exercise competences that have been delegated to them by individual countries. Judges need to clarify whether the EU Corona Fund violates one of these rules – or even both. They made it possible to start urgently so as not to block quick aid and leave a political mess behind. However, the April 2021 decision also states that a violation of the constitution cannot be ruled out.

What is the position of the federal government?

From their point of view, the program has a solid foundation. “This is true from a legal point of view, that is, under the European treaties, and also under national legislation,” said the Secretary of State for Finance, Werner Gatzer, before starting the negotiations. More than two-thirds of Bundestag members agreed that the Bundesrat unanimously gave the green light.

What happens if the court lowers the thumb?

The urgent decision shows that Karlsruhe would certainly first involve the European Court of Justice (ECJ) in Luxembourg. As a result, Germany will also exit its recovery program again: either the ECJ may declare invalid the underlying decision in all EU countries. Or the Federal Constitutional Court could prohibit its use in Germany. Then the federal government, Bundestag and Bundesrat would be obliged to opt for abolition or adjustment.

The judges scheduled the second day of hearings for Wednesday. The verdict is not due in a few months at the earliest.

© dpa-infocom, dpa: 220726-99-156723 / 4

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