Courting Disaster

Germany’s constitutional court has challenged the legality of the European Central Bank’s bailouts, which must finally result in a form of fiscal union or else break the eurozone apart.

CJEUOn 5 May the German Constitutional Court issued a judgement stating that the Bundesbank (Germany’s central bank) should stop buying government bonds under the European Central Bank’s stimulus programme. The judges set a condition that the ECB should prove that it has acted properly, in terms of EU law. This presents a challenge to the ECB at an awkward time, when the EU is trying—and so far failing—to find a federal way to solve the different economic issues that member states face resulting from the covid-19 lockdown precautions.

The Court of Justice of the European Union was set up to ensure that member states follow EU laws, rather than to promote justice more broadly. The improper shorthand for the CJEU is ‘the European Court of Justice’, or ECJ, when the correct shorthand should be EUCJ; this impropriety rises from the EU’s desire to dominate Europe, not just its member states.

Some have argued that the ECB programme constitutes direct financing of governments, which is forbidden by the EU Treaties. The court’s ruling is consistent with the position of Germany and other relatively well-off Northern member states, which argue against centralising special resources in the form of grants, under which taxpayers of the Northern states would pay disproportionately to rescue Southern states that have suffered greater economic consequences from the virus-related lockdown. Southern states counter that the problem is shared and so the solution should be also.

German CourtThe German judges have added a legal twist to the continuing financial problems facing the EU, not the least of which concern the next seven-year EU budget, to which all member states contribute but Southern states wish to draw from more heavily.

A second part of the legal/political problem for the EU is the current challenges that Poland and Hungary, notably, are raising for what the EU considers to be its democratic values. In different but related ways the governments of Poland and Hungary have argued that the EU should not interfere in the countries’ internal legal operations, which the EU has argued in response contradict those countries’ obligations as members.

The EU regards its laws as having precedence over national ones and this has been backed up by the EUCJ:

Notwithstanding the analysis of the detail of the German constitutional court’s decision today, we reaffirm the primacy of EU law and the fact that the rulings of the European Court of Justice are binding on all national courts” Eric Mamer, commission spokesperson, said [1].

The Constitutional Court’s ruling creates a direct challenge to this claim and raises a fundamental question about the status of the European Union’s court, which had already approved the economic stimulus actions of the ECB, and thus challenges the whole basis of the EU’s claim to sovereignty over its members; the defence of this claim is the primary purpose of the EUCJ.

The President of the European Commission, Ursula von der Leyen, argues that EU monetary policy is an ‘exclusive competence’ of the EU; in other words all member states that have signed up to the treaties have committed to follow rulings of the EUCJ on monetary matters. This has been challenged, for quite different reasons, by the governments of Poland and Hungary; their courts are not regarded as independent of government.

Wrong wayIf the EU Commission decides to take an ‘infringement procedure’ in response to the challenge it would have to take it against the German government. However, in Germany the Constitutional Court acts independently and is not under the control of its government. So the German government would have to answer in court (the EUCJ) for actions for which it is not responsible. If the government chose to defend the judgement it would contradict its own actions in support of the Bundesbank, which is also independent and has been cooperating with the ECB and is therefore out of order, in the view of the Constitutional Court.

However, the EUCJ can only act against a member government, not internal agencies, so if it is instructed to act by the Commission, to which it answers, there will be an impasse, unless another fudge is found.

One EU official is reported to have said that the case “goes to the very heart, the very basis of the EU”, which is based on law (its own) and expects its laws to be applied uniformly throughout its remit, to which its members have agreed. All national courts and their judges are obliged by the treaties to apply EUCJ rulings, as the superior court. As the same official added, “The union is based on the uniform interpretation and application of union law, otherwise we have no union”.

WICH-3Defenders of the precedence ruling (made by the EUCJ on its own behalf) regard the EUCJ as the key defender of the EU’s democracy and values, which are being challenged by the actions of the governments of Poland and Hungary particularly. Those governments applaud the German court’s ruling because of the challenge it raises to the supremacy of EU law over national law. The ruling appears to restore national priority over the EU, as it seems to provide an answer to the question that has long been asked of the EU, ‘to whom are you accountable?’ Being accountable ‘downwards’ is not something that the EU project is designed to allow.

[1] Rule of law: “The EU is based on the rule of law. Everything the EU does is founded on treaties, voluntarily and democratically agreed by its EU countries. Law and justice are upheld by an independent judiciary. The EU countries gave final jurisdiction to the European Court of Justice which judgements have to be respected by all.” https://europa.eu/european-union/about-eu/eu-in-brief_en


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