Top court rules Germany can participate in EU COVID fund

Germany's Constitutional Court in Karlsruhe rejected two complaints on Tuesday against a law passed last year to approve legislation ratifying the European Union's coronavirus recovery fund.

Judges rejected complaints that the fund was unconstitutional, ceding too much power from Germany to the EU, and said it did not violate the plaintiffs' right to democratic self-determination.

What did the court consider?

Two parties filed the complaints; Bernd Lucke, co-founder of the euroskeptic Alternative for Germany (AfD), who quit the party after it drifted to the far-right, and businessman Heinrich Weiss, a former head of Germany's leading industry lobby group, the BDI.

They said the fund exceeded the European Union's powers and hindered budgetary oversight by Germany's lower house of parliament, the Bundestag. They objected to the fund enabling the EU to raise money on capital markets with EU member states then jointly bearing responsibility for the loans. 

The plaintiffs argued that Germany might have to foot the bill if other states did not meet their repayment obligations, creating large amounts of extra debt for decades.

They also said that the scheme had no basis in European treaties.

However, the court ruled that the arrangement, agreed in December 2020, did "not constitute an obvious overstepping of the current integration program of the European Union and also does not impair the overall budgetary responsibility of the German Bundestag."

Six of seven judges backed the ruling, with one dissenting opinion.

The court had approved Germany's participation in a fast-track judgment in April 2021. However, judges conceded at the time that there was still a possibility of a constitutional violation — leading to a fuller examination of the case that ended with Tuesday's ruling.

What is the recovery fund?

In response to the economic damage caused by COVID-19 pandemic and lockdown, the EU set up the reconstruction program to help member states recover. However, it requires the European Commission taking on debt on a grand scale.

The recovery fund, dubbed Next Generation EU, allows the European Commission to raise up to €750 billion ($786 billion) on capital markets. Brussels would then channel the money to member states through payments linked to jointly agreed reform and investment plans.

Amounts would be awarded partly as grants and partly as long-term loans.

Many of the projects lack an obvious connection to COVID — green hydrogen research, electric mobility projects, the digitalization of education systems. Germany expects to receive almost €26 billion in such areas. 

EU countries are jointly liable for the repayment of the loans. However, according to the Federal Court of Auditors, Europe's largest economy would shoulder by far the biggest burden when it comes to paying for the fund — an expected total of around €65 billion ($68 billion).

rc/msh (dpa, Reuters, AFP)

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