European Union: With Massive Breach of Contract into the Liability and Debt Union

The EU Council wants to circumvent the European treaties with dubious legal constructs. On December 14, 2020, it passed a resolution on the EU's own resources system, which entails unpredictable financial risks for the member states.

In the European treaties (Article 311 TFEU), the EU states agreed that the EU budget must be "fully financed from own resources." The debts now envisaged certainly do not belong to "own resources"; rather, they are borrowed capital. Legal tricks are being used to attempt, for the first time in the history of the EU, to incur massive debt. To cover up the breach of contract, positively sounding terms like solidarity, "Next Generation EU," or "Corona Recovery Program" are used for the own resources system. However, this does not change the fact that the founders of a united Europe, for good reasons, did not allow for collective debt.

Europe's Big Step into the Liability Union and Debt Union with the Approval of German Politicians

Germany has so far – rightly – rejected the debt of the EU budget. It would be even worse than Eurobonds because Germany would be liable for EU debts not only if another state went bankrupt, but also if it simply left the EU. But now the debt union is coming in through the front door. The significant responsibility lies with Federal Minister of Finance Scholz, who has not expressed himself critically about the breach of contract in the Bundestag – as would be his duty as Minister of Finance – but rather celebrated it: "It is the way to fiscal union, and it is a good way for Europe's future." Similar statements were made by many German politicians, as well as by the President of the EU Council, Charles Michel, and the President of the ECB, Christine Lagarde.

Debt Union 2

The EU operates other programs besides "Next Generation EU." In total, a debt of the EU that exceeds 1 trillion euros is to be enabled. This consists of 750 billion euros in loans taken on by the EU, for which the member states are fully liable. Of this, the member states will receive 350 billion euros as loans and 400 billion euros as non-repayable financial transfers. A 100 billion euro program for financing short-time work (SURE), also financed by loans. 240 billion euros in loans for health and pandemic costs are to be provided through the European Stability Mechanism (ESM). 200 billion euros in liquidity assistance and guarantees for small and medium-sized enterprises are provided by the European Investment Bank (EIB).

Massive Redistribution through Unconditional Aid

The loans/grants to individual EU countries are nothing more than a massive redistribution, which is officially justified with solidarity. However, the use of the funds often occurs haphazardly and poorly controlled. The Czech Supreme Audit Office has just criticized that the EU's subsidies are being used without a strategy. In addition, it is surprisingly possible to use the funds for purposes that have no relation to the corona pandemic. This is likely to further promote the unsustainable financial policies of some EU countries.

Joint Liability with Unlimited Risk

In previous community programs, the liability of individual EU states was contractually limited. However, the new law applies collective liability. This also includes the obligation to provide supplementary contributions in case of insolvency or exit of individual member states from the EU. This is an unpredictable financial risk for the