The Twenty-seven have just given the green light to the Next Generation European Recovery Plan by approving the subject that was pending the great fiscal impulse of 750,000 million euros: the ratification of the new Own Resources Decision, that is, the European taxes with which Eurobonds will be amortized.
They have been able to ratify it because before the Constitutional Court of Germany, based in Karslruhe, surrendered on April 21 in its blockade of new financial resources, which it had decreed on March 26 at the request of the local extreme right. Then he temporarily prohibited the federal president from ratifying them, until the litigation initiated was settled.
Finally, on April 21, he authorized him, rejecting the precautionary paralysis that the ultras wanted. He argued that the damage to the recovery from the pandemic economic crisis and to the credibility of the country that this paralysis would generate would be greater than that which it would avoid, arguing as “unlikely” that it would end up giving them the reason on the underlying issue (still pending): the dent in its “constitutional identity” (article 79), and therefore, in its national economic policy.
The surrender to the European impetus can be seen in that previous Karlsruhe rulings had stressed that the essential thing was to preserve the decision-making capacity of a sufficient hard core of that economic policy. Now turn the tables. Berlin guarantees to Eurobonds would only be violated, he proclaims, “if those financial commitments not only had the effect of restricting budgetary autonomy, but essentially denied that autonomy.” So he is content to maintain even a very minimal degree of influence.
The thing was drawer. Because although the fiscal effort of the Next Generation will have an enormous impact, the national responsibilities that it entails are limited. In the case of Germany, and put for the worst – namely, that the new taxes failed and that none of its 26 partners fulfilled their obligation to contribute their quota to replace them with direct fresh money – I should add, if the calculator, up to 562.5 billion to your stock of debt (that is, three-quarters of the 750,000, since its quota is 25%), which reached 2.3 trillion in 2020. Its debt ratio would thus go from 69.8% of GDP to 86.6% , just four points more than its peak in 2010, 82.3%. Something perfectly digestible … and competitive.
So there will be no clouds for the EU recovery fund due to the still pending final decision of the German court. Except for its aggrandizement and desirable future qualitative leap, due to the insidious interference implied by its announcement that it will “review” whether the Own Resources Decision “could lead to permanent instruments that essentially entail the assumption of responsibilities as a result of decisions made by other States. ”. Just the permanent Treasury that will one day be needed to achieve fiscal union and be able to act like Joe Biden.
That surrender was followed almost immediately by another, on May 18, in a matter of concomitant interest. The German Constitutional Court closed the lawsuits (always far-right) against the Public Asset Purchase Program (PSPP), launched by Mario Draghi’s ECB in 2015 to end the Great Recession, and which under Christine Lagarde have been expanded through the Pandemic Crisis Program (PEEP).
After illegally challenging the EU Court of Justice – which holds true final jurisdiction in these cases – which had validated Draghi’s program in 2018, the German magistrates considered that it had been adopted without specifying the reasons for its “proportionality”. And on May 5, 2020, they forced the Bundesbank to stop its purchases of public bonds in three months if they were not documented within that period, simultaneously putting Parliament and the federal government and their European commitments in a loophole.
In their recent ruling, they rewind and satisfied their claims to explain this “proportionality”, thus backing off their strategy of demolishing the expansive monetary policies in Frankfurt that have saved the euro zone.
But they do it with insurmountable cynicism. They try to save their mistake by pretending that it is the ECB who rectified their lack of proportionality in the PSPP: evaluating their cost-benefit ratio, discussing other options, interactions with fiscal policy and analyzing the possible negative effects … alluding to the fact that he did so after his ultimatum of May 5. It indicates that it did so at the Governing Council on June 3 and 4, whose long minutes account for an in-depth discussion on all of this; and that he sent through the Bundesbank “classified documents” to the German Parliament.
False of half falsehood. The central bank did all of that, yes, and on that date, yes. But he had evaluated proportionality and other requirements long before. From the beginning of the shopping program. Specifically, in the Governing Council of January 21 and 22, 2015, in which it approved the PSPP after a long, detailed and bitter discussion … as Karlsruhe would have been able to appreciate simply having read the minutes of that decisive meeting: the one in which inaugurated!
There it is. The proposal for immediate quantitative expansion to activate anemic inflation and the opposite positions of the hawks; the options between “act at this meeting” and “wait and see”; the advantages and disadvantages of each; the characteristics, convenience and proportionality of purchases, according to the “distribution key” of each country in the capital; its amount, discussed at 50,000 million euros, finally raised to 60,000 million; the evaluation of eventual losses …
If the magistrates had read them six years ago, if they had worked, if they had seen what was public, as they were required to, they would not have interfered with the central bank, they would not have challenged the CJEU, they would not have made a fool of themselves. Others complied. Like the expert Charles Wyplosz, who delved into the guts of the minutes and celebrated the new transparency of the entity in an early article also public (ECB minutes: what really tell us, Vox-CEPR, 2/3/2015).
So once the German court has been rendered by force of the arguments in the economic-monetary aspect of these battles, it only remains to dissolve its legal attack on the primacy of community law over national law, and of the CJEU over itself. But for this, the European Commission will have to fulfill the commitment of Vice President Vèra Jourová to open an infringement file to Germany: because otherwise we would “give a boost” to Hungarians and Poles who intend to imitate Karslruhe’s blows to European construction (Der sppiegel, 9/29/2020). If Ursula von der Leyen doesn’t stop it. It will have to be explained.