Comment by Prof. Bernd Lucke, Main Complainant

With its ruling today, the Federal Constitutional Court rejected our constitutional complaint against the financing of the "Corona Reconstruction Fund" through jointly responsible EU debts amounting to 750 billion euros.

In short and simplified, the verdict states the following:

• The budget of the European Union is subject to a general prohibition on debt. The expenses made by the EU budget must be financed by the own resources of the European Union. External financing through borrowing is not permitted.
  (So far, so good!)There is also a summary as a press release   and a very worthwhile dissenting opinion by Judge Peter Müller, who sharply criticizes the majority vote of the 2nd Senate. You can find this dissenting opinion on the last pages of the ruling 
  
  

• However, there is in the EU a "general" but not an "absolute" debt prohibition. Therefore, the EU may exception-wise take on debt if the funds borrowed are spent for a clear purpose, serve only programs outside the budget, and the debts are clearly limited in time and volume.
  (This is not good at all. These are rubber conditions that allow the EU to continue accruing debt through the backdoor).

• There must never be more debt taken on than the EU has available in its own resources in the budget.
  (Very bad. This means that the EU can double its expenditures in the future, financing half of these expenditures through borrowing in shadow budgets.)

• In the case of the Corona Reconstruction Fund, the EU has taken on more than twice as much debt over two consecutive budget years than it has available in own resources, but this is still lawful because it does not depend on the annual budget plan but on the seven-year financial planning. And calculated over seven years, the Corona debts are still lower than the EU's own resources.
  (It is quite obvious that they were looking for ways to soften their own criteria.)

• Every future borrowing must be approved by the Bundestag.
  (At least!)

• No permanent mechanism may be established whereby the Federal Republic of Germany is liable for the debts of other countries.
  (Good, but this is already stated in the EU Treaty (Art. 125)).

• Whether the Corona Reconstruction Fund meets the criteria set by the Federal Constitutional Court for permissible debt financing in an emergency situation (pandemic) is questionable for several reasons, including that expenditures for climate protection have nothing to do with the consequences of the pandemic, because ongoing and already existing EU programs are being funded from it and because the distribution key for the funds is based on the gross domestic products and unemployment figures before the pandemic. Nevertheless, it is not "obvious" that it is not a program to mitigate the consequences of the pandemic.
  (One wonders when something is “obvious” to the Federal Constitutional Court.)

• It cannot be ruled out that the general EU debt prohibition is circumvented by the borrowed debts, but it is not obvious.

• It is also not to be ruled out that the Reconstruction Fund (and specifically the grants of 390 billion euros) circumvents the obligation of non-assistance from Article 125 TFEU, but this is also not obvious.
  (No comment)

• The liability of Germany for potentially defaulting other member countries embedded in EU debt does not raise concerns because this liability is only temporary. Ultimately, the defaulting member state must pay its debts itself.
  (That is true – on paper. But what if the defaulting member state simply does not do it?)

Karlsruhe's Quintessence: 

• Our constitutional complaint is permissible but unfounded.

The essence of the dissenting opinion by Peter Müller:

• In view of the serious doubts expressed in the judgment about the legality of EU debt, there should have been at least a referral to the Court of Justice of the European Union.
  (Very true! Unfortunately, little fruitful is to be expected from the CJEU).

• The (unsuitable) attempt by the court to show limits for future borrowing by the EU means that the Federal Constitutional Court “accepts the entry into a permanent and fundamental change of the European financial architecture without the necessary primary law basis”
  (This is a public slap in the face for the fellow judges!)

• The ruling carries the risk that the EU law competence control is substantially depleted.
  (This is not a slap in the face. This is a strike with a cane).

Our Quintessence: 

Karlsruhe has ducked its head. The borrowing for the Corona Reconstruction Fund NGEU could not be changed anymore anyway, so it was passed – despite the clearly stated doubts of the judges about its contract compliance. But instead of at least nailing down poles to prevent or limit the next EU debt initiatives, the Federal Constitutional Court has left the key legal questions open: If there is doubt as to whether the Corona Reconstruction Fund meets the requirements for lawful debt, how should this be determined for future debt-financed programs? And can the EU launch merely "questionable" programs and always get away with it?

It seems that the next constitutional complaint is almost inevitable.