Reconstruction fund: Bundestag will probably allow Europe new debts

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It is a truly historic decision: This Thursday, the Bundestag will vote on whether the EU may incur large amounts of debt in order to finance the € 750 billion reconstruction plan in the Corona crisis.

If the MPs debate the project, the exchange is likely to be sharp.

Because not only parliament, but also individual parties are divided on this issue.

For some, such as the Greens, the reconstruction fund and shared debts are a sign of European solidarity.

For others, such as Federal Finance Minister Olaf Scholz (SPD), the plans are a step on the way to a European fiscal union, i.e. an EU that operates independently, levies taxes and can run into debts on its own.

For critics such as the Federal Court of Auditors, the EU debt for the fund is the entry into a barely controllable European debt union, which harbors incalculable risks for German taxpayers.

The so-called “Capital Adequacy Ratification Act”, on which the Bundestag votes and which is also being discussed in a similar form in the 26 other EU member states and in some cases has even already been passed, is the basis for the reconstruction fund to begin its work.

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If they pass the law, the national parliaments allow the EU Commission, among other things, to borrow the 750 billion euros for the plan on the markets and guarantee this debt.

It is also the basis for the current EU long-term budget.

The FDP struggled with itself to the last

A large majority of members of the Bundestag support the plan, including members of the governing parties CDU, CSU and SPD as well as the Greens.

"As a pro-European party, we will agree to the equity decision for the future of Europe despite all the criticism of the detail," says Franziska Brantner, the Greens' spokeswoman for European policy.

"Anything else would be irresponsible."

Criticism of the plans comes from the left, from the AfD and from parts of the FDP.

The FDP is actually divided on the issue.

Some MEPs reject the plans because they fear that they will mark the beginning of a European debt and liability union.

Until recently, the party therefore struggled to maintain its voting behavior.

Despite concerns, the FDP is finding it difficult to unanimously reject the project for fear of being anti-European.

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Especially since liberal politicians from other countries were involved in the negotiations for the fund, such as the Dutch Prime Minister Mark Rutte.

In addition, the French President Emmanuel Macron, whose party La République en Marche sits in a parliamentary group with the FDP members in the European Parliament, initiated the plan.

On Tuesday evening, the parliamentary group is said to have agreed at its meeting to approve it in plenary - even if individual MPs can still deviate.

The Commission is closely following the German debate

It is clear to all parties that a project that the 27 member states agreed on at their marathon summit last July can no longer be untied anyway.

This would mean that the Bundestag would probably also achieve a two-thirds majority in the vote.

It is disputed among constitutional lawyers whether this is necessary because the project could undermine the budget law of the Bundestag.

The European Commission is following the German debate very closely, after all, the authority wants to issue the first bonds as early as June in order to collect money for the reconstruction plan.

In order for funds to be paid out quickly, not much can go wrong.

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Most recently, Christine Lagarde, the President of the European Central Bank, warned that the funds from the fund would have to be disbursed quickly, otherwise the mood in the economy could turn.

The first funds could flow in July

There are still some stumbling blocks waiting on the way to the payouts.

On the one hand, the parliaments of all 27 member states have to approve the new EU debt.

So far, only 13 popular representations have completed the ratification process, namely Croatia, Cyprus, Slovenia, Portugal, France, Bulgaria, Malta, Italy, Spain, Belgium, Greece, Luxembourg and Latvia.

In addition, all EU states have to submit investment plans, which then have to be checked and approved by the EU Commission so that money can flow.

If the schedule is adhered to, the first payments could be made in July, for which southern European countries in particular are waiting.

There is also an appeal from Brussels to Berlin: “It is in the best interests of the member states that the ratification process be completed quickly.

All the more so since the Covid pandemic is not yet under control and the companies and citizens affected by the crisis urgently need financial support, ”said EU budget commissioner Johannes Hahn to WELT.

Despite all the criticism inside and outside the Bundestag, he expects the fund to pass the Bundestag.

“I am confident that Germany will complete the ratification of the capital adequacy decision this week, which democratically legitimizes the raising of funds on the market.

I'm sure the rest of the countries will follow suit soon. "

The European Reconstruction Fund is still well on schedule.

"I am confident that we can start issuing bonds and raising funds at the beginning of the second quarter," said the Austrian politician.

“Keeping to the schedule is also important because the financial resources from the development and resilience fund must be invested by the end of 2026.

Member States need preparations to be completed on time so that they have more time to implement their projects. "

Lawsuits before the Federal Constitutional Court

Nevertheless, the project from Germany could still be blocked - albeit from outside Parliament.

It has been agreed that the project will be sued before the Federal Constitutional Court;

corresponding lawsuits are apparently already being organized.

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"The capital adequacy decision and the reconstruction plan will definitely end up in Karlsruhe, that's as safe as the amen in the church," said Matthias Herdegen to WELT.

The lawyer is director of the Institute for Public Law and Director of the Institute for International Law at the University of Bonn.

"The package tears several constitutional red lines."

For example, the decision shifted the balance between Berlin and Brussels because the EU had previously had to get along with the budget allocated to it without running into debts.

In addition, expenditure would be incurred through the fund that would have to be financed by the Member States.

It is “tangible that the Federal Constitutional Court could hold up the whole package,” says Herdegen, “because it is based on the EU's massive overstepping of competencies.

The obligation to make additional payments in the envisaged liability community violates Parliament's budgetary rights.

The whole debt construct is ultimately based on Germany's financial strength. ”Investors would only buy the Commission's promissory notes because the German taxpayer is behind them.