The Covid-19 pandemic has represented a destructive explosion at the heart of the EU. It has, once again, exposed economic weaknesses, divergent national attitudes and priorities and the fact that economic and cultural convergence between member states is a myth.
Into the middle of this destruction, the German Constitutional Court has now fired another missile. By putting aside a ruling by the Court of Justice of the European Union (CJEU) and asking for clarification from the European Central Bank (ECB) about its bond buying programme, it has raised uncomfortable questions about the EU legal order. All leading to much indignation and gnashing of teeth.
While much has been written about the merits, demerits and political impact of the German Court’s bombshell, here I want to examine the main principles, rather than the legal detail, that the judgement has put into question.
First of all, let us be clear. The German court is not some politically controlled quango court that is “out of control” as some have suggested. It is the most highly regarded institution in the largest, most powerful Member State – a state that is maybe more obsessive than most about the meticulous application of the law.
In an EU that prides itself on its legal order, the court’s judgements cannot be dismissed out of hand as the ECB seems intent on doing. Neither will infringement proceedings against the German government help, as the separation of powers underpinning a functioning democracy means that the government cannot, and should not, coerce the court to change its judgement.
It is no secret that EU institutions have, for many years, and largely in response to severe stresses, been pushing the envelope in how they interpret the mandates they were given under the various treaties. It is also no secret that many in Germany and elsewhere have become increasingly uncomfortable with what they see as unjustified mission creep.
The controversy surrounding the court’s judgement boils down to one thing and one thing only – who has jurisdiction and the final say on the legality of actions taken by EU institutions?
The EU’s position is clear. It claims that the EU legal order makes it clear that the CJEU has ultimate jurisdiction in matters relating to EU law and the interpretation of the treaties. The law means what the CJEU interprets it to mean. End of story.
The German court has taken a more nuanced view. While it has not challenged the CJEU’s position as the arbiter of EU law, it has introduced questions regarding democratic accountability. The argument is as simple as it is explosive.
The German court argues that Germany, as a Member State, can only participate in EU initiatives if they fall within the boundaries of what the German government has, with democratic consent, agreed to within the treaties it has signed. If actions fall outside such mandates, then the German government does not have democratic consent to participate. The judges in effect assert that it is their role to determine whether the German government is behaving legally and within the bounds of the democratic consent of the German people, not the CJEU’s.
This argument is particularly relevant with regards to the actions of the ECB. While the ECB, at German insistence, is “independent” from political interference when it sets monetary policy, it has no mandate to determine social or economic policy. Yet, it is impossible to conduct the sort of monetary policy the ECB has now embarked upon without it having significant social and economic impacts.
How a central bank conducts its monetary policy has significant consequences for who gets richer and who gets relatively poorer. These distributional decisions are properly political not technocratic. As we warned four years ago in the UK context, they pose serious questions of democratic accountability around the meaning and limits of central bank independence in an age where monetary policy has expanded well beyond simply setting interest rates to being a central protagonist in economic policy and wealth distribution.
In the Eurozone, the same issue becomes even more challenging since the ECB’s actions are committing Member States to expenditures, liabilities and risks that have an impact on national finances but are outside the control of national parliaments – something that has never been agreed in any treaty. The ECB’s actions “affect the limits set by the overall budgetary responsibility of the German Bundestag”, according to the Court.
The German court’s judgement shines an uncomfortable and unwelcome bright light on the fault lines in the legal structure of a Union that is neither fish nor fowl. It has, once again, rendered naked for all to see the euphemistically named “democratic deficit” within the EU.
Until now, such contradictions and illegitimacies within the Union have been papered over politically with fudge after fudge. This time, that will be more difficult. The judgement digs away at the core of the EU’s legal order and democratic legitimacy and cannot simply be waved away or buried under a mountain of political fudge. The torrent of anger emerging from EU institutions is best interpreted as the growls of a cornered tiger rather than legitimate indignation at a mistaken judgement.
The red-robed judges have stopped short of the nuclear option – so far. They have given the ECB the opportunity to show that its programme is “proportionate” and therefore legal. But their message to EU institutions is clear enough: you have been pushing the envelope too far with impunity. You are reaching the point where enough is enough. Tread carefully.