Judy Asks: Will
the EU Recovery Fund Happen?
On March 26, the German
Constitutional Court ordered the country’s president not to sign off on
legislation to ratify the EU’s €750 billion post-coronavirus recovery fund. At
stake is Europe’s ability to recover after the pandemic is over.
·
April 01, 2021
KRZYSZTOF
BLEDOWSKICOUNCIL DIRECTOR AND
SENIOR ECONOMIST AT THE MANUFACTURERS ALLIANCE FOR PRODUCTIVITY AND INNOVATION
It’s hard to say, but the impact of the EU’s
post-coronavirus recovery fund will come late and may be less than meets the
eye. Not being a sovereign state, the EU is ill equipped to run policies on the
fly.
On the first account, even by the EU’s standards of
bureaucratic crawl, the spigot will open slowly. A comparison with the United
States is not fair, but here it is. The 2021 American Rescue Plan Act took less
than two months from proposal to ratification. Europe is eight months into
ratification of the NextGenerationEU recovery
plan, and sixteen of the twenty-seven EU member states have OK’d it so far.
It’s fair to expect that just a quarter of the money will
reach the recipients by the end of 2023.
In terms of impact, the plan’s priorities are a good
many. Aside from recovery support, they run the gamut from green transition
through digital transformation to policy modernization. With so many mouths to
feed, few effective euros will support any one program.
EU member states can’t afford to wait, so many have
stepped in on their own. From the €100 billion ($117 billion) France Relance (France Relaunches) through
Poland’s 312 billion zloty ($78 billion) Tarcza antykryzysowa (Anticrisis Shield) to the
€130 billion ($153 billion) Kraftpaket für Deutschland (Strength
Package for Germany), they share swiftness of action with local purpose. For
the wonkishly inclined, it’s called subsidiarity.
LUCAS
GUTTENBERGDEPUTY DIRECTOR OF THE
JACQUES DELORS CENTER
Yes. The EU’s post-coronavirus recovery instrument has
a sound legal and economic basis. It was approved unanimously by all EU member
states. In the German Bundestag, the fund was supported by an overwhelming
majority across the political spectrum. And the German Constitutional Court has
never shown any appetite for causing irreparable operational damage to an
ongoing EU economic policy.
Therefore, the most likely scenario is still that the
court will allow the ratification process to go ahead. More generally, observers
knew that the recovery instrument’s legal basis was a new construction that
would be challenged in court. This case will now make its usual way up to the
European Court of Justice, which will decide whether the instrument is legal
under EU law. This will take a while. And unless something dramatic and
completely unexpected happens before that, the recovery fund will go ahead as
planned.
THU NGUYENPOLICY FELLOW ON EU INSTITUTIONS AND
DEMOCRACY AT THE JACQUES DELORS CENTER
Yes. Until recently, the German Constitutional Court’s
approach to questions of European integration has been “yes, but . . .”—often
likened to a dog that barks but does not bite. The court’s May 2020 judgment
that the European Central Bank’s public-sector purchase program went beyond the
bank’s remit marked a notable difference. But even then, the German government
seemed to resolve the case easily enough without causing actual damage to the
program at hand.
It would be surprising if the court were now to halt
the EU’s post-coronavirus recovery fund altogether, which poses very little
risk to the German budget. The stakes for the EU and its member states are
simply too high.
The court’s March 26 order for
the German president not to ratify the recovery fund until the entry into law
of the EU’s own resources decision,
which would increase the maximum amount of member state resources that can
finance EU expenditure, might be a welcome pretext for other member states to
hold off on their own ratifications of the own resources decision.
For now, the ratification timelines of Austria,
Hungary, the Netherlands, and Poland are still unknown. If the experience of
the December 2020 European Council negotiations are anything to go by, it is
not unthinkable that some member states may hijack the ratification process to
force the European Commission’s hand in other dossiers.
MARTA PILATIEU ECONOMIC AND REGIONAL POLICY ANALYST AT
THE EUROPEAN POLICY CENTER
Most likely, yes. The German Constitutional Court’s
March 26 order might delay the package’s ratification by some weeks, but it is
unlikely that the whole process will come to a halt. This delay should not be
cause for concern because other countries are also likely to ratify at or after
the end of April.
Another country where the ratification process might
meet some obstacles is Poland, where a junior coalition partner threatens to
oppose the EU’s post-coronavirus recovery fund. Even there, however, there is
still enough time for the government to solve its internal struggles and find
the necessary votes.
Additionally, the EU member states’ national recovery and resilience plans will
not be approved until well into the summer. That will allow sufficient leeway
for national debates over the ratification of the proposed own resources decision,
which, if approved, will raise the maximum amount of resources that can be
called from member states to finance EU spending.
PAUL TAYLOR CONTRIBUTING EDITOR AT POLITICO EUROPE
Yes! The German Constitutional Court loves to flex its
power and assert the Bundestag’s budgetary sovereignty. But it has never yet
killed a major EU initiative—let alone in the middle of a crisis—despite
repeated lawsuits by Euroskeptic professors against the European Central Bank’s
bond-buying policies. The red-robed sages of Karlsruhe, where the court sits,
won’t want to take responsibility for such a massive blow to economic recovery
and market confidence. At most, the court’s March 26 order means the EU faces a
few weeks’ delay.
The court is far more likely to try to draw lines in
the sand for the future than to stop an EU recovery fund that has already been
approved by both houses of the German parliament and is widely backed by German
public opinion. For example, the court could cement the fund’s one-off nature
to prevent it from morphing into a permanent EU borrowing capacity by ruling
that any such step would require changes to the EU treaties and the German
constitution.
That would be a setback for those, including me, who
believe the EU should be able to issue debt for long-term public investment in
green and digital transformation. It would increase pressure for treaty change
to achieve that objective—but alas, everyone knows how accident prone treaty
change can be.
FABIAN ZULEEG CHIEF EXECUTIVE OF THE EUROPEAN POLICY CENTER
In the end, it is more likely than not that the EU’s
post-coronavirus recovery fund will happen. But the German Constitutional Court
is fiercely independent, so there are no guarantees. This case also increases
the possibility that there will be delays in the fund starting to pay out,
which would reduce its positive economic impact. This controversy decreases the
likelihood of a German commitment to additional steps in the future, which will
be necessary to deal with the depth of this economic crisis.
More generally, the German political and legal systems
need to answer some questions both about their suitability to deal with crises
and about Germany’s commitment to European integration. Dealing with crises
requires unbureaucratic and speedy decisions, but this seems to be a challenge,
as has also been witnessed in the slow rollout of coronavirus vaccines.
Germany
is in danger of becoming the awkward partner in European integration. Even when
there is a broad consensus for action, the country’s legal system raises
barriers and difficulties. This was seen in the German Constitutional Court’s
May 2020 decision that the European Central Bank’s public-sector asset-purchase
program overstepped the bank’s powers. Given its size and history, Germany
carries a special responsibility for addressing economic crises and supporting
European integration.
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