- Last week, the German Supreme Court dropped a small bomb criticizing the European Central Bank's aid policy for the euro area.
- The judges therefore launched a challenge in the form of an ultimatum: the ECB now has three months to justify its massive redemptions of state debts.
- German judges refuse to comply with the Court of Justice of the European Union (CJEU), forcing the Commission to threaten the country with sanctions.
Europe facing a new crisis. Last week, the German Supreme Court dropped a small bomb by sharply criticizing the European Central Bank's aid policy for the euro zone, via the massive buyout of public debt. In response, the European Commission spoke on Sunday of possible legal proceedings against Germany. This controversy could threaten the European support plan to deal with the coronavirus, and more generally, the entire legal framework of the European Union. Explanations.
What does the German Supreme Court criticize the ECB for?
The Federal Constitutional Court of Karlsruhe, the highest court in the country, sent an unprecedented warning shot to the European Central Bank on May 5. She criticizes the Frankfurt Institute for the policy of massive redemption of public debts of the States (2.600 billion euros injected into the markets) carried out since 2015 and reactivated last November.
"The German Court considers that this repurchase of debts allows the ECB to monetize public expenditure, therefore to finance the States in a disguised manner, which is prohibited by the treaties", ensures Jézabel Couppey-Soubeyran, economist at Paris 1 Panthéon- Sorbonne. "Here it takes the statutes of the ECB literally, fearing a threat to price stability and rising inflation, which is however questionable ...".
The magistrates estimate that this massive injection of liquidities affects the German citizens by causing "considerable losses for the private savings". They therefore launched a challenge in the form of an ultimatum to the ECB: it now has three months to justify the benefits of its policy, in an "understandable and detailed" manner, in which the powerful German Central Bank will be prohibited from participating, which would jeopardize the whole process and affect the euro area.
Why is this attack unprecedented?
The magistrates of Karlsruhe have not only attacked the independence of the ECB. By implicating it, they refuse to comply with the Court of Justice of the European Union (CJEU) which had validated this debt buy-back policy at the end of 2018. A decision "incomprehensible" according to the judges, which "completely ignored »The« economic consequences »of the support plans.
“In European law, however, it is the European Court which has jurisdiction to judge the actions of the ECB. By calling into question this jurisdictional competence, it is the whole structure of European law which could be delegitimized ”, recalls Christian Lequesne, professor at Sciences Po Paris.
"The risk is that in the future the Supreme Courts of each member state will challenge the decisions of the European Court and thus threaten the harmonization of law", continues the specialist on Europe. This decree of the German court has also been welcomed by Hungary or Poland, who are regularly in confrontation with the Commission to have their national law take precedence over Community law.
How did the European institutions react?
This ruling has created a storm within the EU. After an emergency meeting, the European Central Bank swept the critics the same day, saying it would continue its mission to aid the euro area. This is all the more so since the economy has sunk into a recession of historic magnitude due to the epidemic of coronavirus. It is also under the same principle of debt buyback that 750 billion euros have recently been released by the ECB to revive the continent's economy.
The European Commission has hit the table. "The ultimate word on European law has returned to Luxembourg", seat of the European Court, ruled Ursula von der Leyen on Sunday. The President of the European Commission even mentioned possible legal proceedings against Germany following the very critical judgment of her Supreme Court.
What's going to happen ?
The problem could be resolved if the ECB explains the program, Angela Merkel said on Monday, according to remarks reported to Reuters by two participants in a meeting of the governing bodies of CDU, the conservative party of the German chancellor. "The federal government is not the court in Karlsruhe, and even if there are probably Merkel's allies who are on this critical line, notably at the CSU, the chancellor should once again be on the side of the compromise ”, relativizes Christian Lequesne. "The most probable is that the decision of the German court is a simple blow of sword in the water, adds Jézabel Couppey-Soubeyran, but that will have created a shock wave quite destabilizing in the current situation".
Economy
Coronavirus: ECB emergency program "could be extended" after 2020
World
Germany: concern rises around deconfinement
- EU
- Bce
- Angela Merkel
- Germany
- European Commission
- central bank