Germany's constitutional court rejects challenge to EU's COVID-19 recovery fund

Germany's constitutional court rejects challenge to EU's COVID-19 recovery fund

On March 10, 2021, the flags of the European Union flutter in front of the headquarters of the European Central Bank ECB in Frankfurt am Main, Germany. ARMANDO BABANI AFP BERLIN -- Germany's constitutional court on Tuesday threw out a legal challenge to the European Union's 750 billion-euro $786 billion recovery fund, which saw the EU take on joint debt to help member states overcome the COVID 19 crisis.

The ruling will lead to a debate on whether or not the EU can take on joint debt for other crises in the future, at a time when the conflict in Ukraine and the energy standoff with Russia are forcing member states to announce costly relief programs.

The decision was made by ZEW economist Friedrich Heinemann, a boost to those who support such an approach, he added, Pressure from Brussels will now grow on the German government to clear the way for debt financing of new EU programs. The decision was welcomed by German Finance Minister Christian Lindner, but said that some aspects of the decision would have to be closely examined by the government.

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For example, it was underlined that joint borrowing in Europe has only an exceptional character and is not available for general financing of political tasks, said Lindner, head of the liberal Free Democratic Party.

This is especially important in light of the current proposals. The European Commission has the ability to raise up to 750 billion euro on capital markets and pass on the money to member states through payments related to agreed reform and investment plans, partly as grants and partly as loans.

The EU budget will be repaid over the coming decades, with Germany shouldering the biggest share of any member state.

The ruling rejected two constitutional complaints against legislation passed by Germany's lower house of parliament in March 2021 to ratify the massive funding program.

The complaints were brought by Bernd Lucke, co- founder of the eurosceptic Alternative for Germany AfD who left the party after it drifted further to the right, and Heinrich Weiss, a businessman who once served as the head of German industry lobby group BDI.

The court said that the ratification act had not violated their right to democratic self-determination nor did it affect the overall budgetary responsibility of the Bundestag Lucke, but it was positive that the court had emphasized that the EU has no general authority to take on common debt.