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The Next Generation EU programme (NGEU), the economic recovery package which issues EU bonds to finance loans and grants to member states, has recently been under the spotlight in the German constitutional court (Bundesverfassungsgericht).
A group of German economists had asked the court to assess whether the decision on the EU’s own resources, which the German Bundestag ratified in February 2021, would constitute a breach of the principle that European integration can only happen on the basis of the competencies assigned to the European Union as defined in the German constitution.
Among those challenging the legitimacy of the decision was the former member of the European Parliament Bernd Lucke, who co-founded the Alternative für Deutschland (AfD) party.
The own-resource decision allows the Commission to issue bonds with a total of €750 billion – adapted for inflation compared to 2018 prices – to refinance the “recovery and resilience facility”, the core of the Next Generation EU programme.
The package was first initiated by EU heads of state and government in July 2020 as a response to the economic shock of the COVID pandemic, although the means are spread out over several years and thus not only an immediate response to the crisis.
Parts of the funds are also earmarked for spending on climate investments as well as the digital transition, which seems to cause some concerns for the constitutional court.
Nevertheless, the court argued that it would “at least not obviously” overstep EU competences, “if the funds are used for an individual authorisation” and “in this respect strictly earmarked from the outset.”
According to the ruling, this condition was met in the case of the programme due to its clear link to the COVID pandemic.
The court argued with Article 122 of the Treaty on the Functioning of the EU (TFEU) that allows for an EU response if “severe difficulties arise in the supply of certain products”, or “Union financial assistance to the Member States concerned” in the case of natural disasters.
Moreover, the ruling states that the Bundestag decision to ratify the NGEU programme “assumes that the Recovery instrument and NGEU are exceptional measures to deal with the significant economic impact of the Covid-19 pandemic”.
This was also underlined by the German government and representatives of the parliament during the oral hearing, the court says, and “this assessment was also the basis for Germany’s consent”.
“In this respect, it was not a question of entering into a transfer union,” the ruling reads.
The court was not unanimous in its decision, however.
The justification that something would “not obviously” overstep treaties would not be a sufficient assessment of the case, says the minority vote by one of the judges, Peter Müller, who was a former politician of Christian Democratic CDU, the party of Angela Merkel who agreed to the programme.
“The distribution key of the funds, their intended use and the duration of the expenditure speak against the fact that the planned measures are aimed specifically at overcoming the consequences of the COVID-19 pandemic and are not a general economic stimulus programme,” he wrote in his minority statement.
“The necessary connection between the consequences of the pandemic and the measures envisaged in the NGEU for digitalisation or for achieving climate neutrality is not apparent,” he added.
The Greens in the European Parliament welcomed the ruling.
“Europe is capable of acting in the crisis,” said Rasmus Andresen, head of the German delegation in the Green group in the EP, adding that “the judges leave no doubt that all political concerns are legally untenable”.
“It is clear from the ruling that similar measures can be adopted for future crises,” Andresen added.
“The ruling is a slap in the face for conservatives and liberals who have argued with legal concerns in the political debate.”
Via Twitter, the German finance ministry welcomed the court ruling, but the ministry led by the liberal Christian Lindner also emphasised that EU debts had to be an exception.