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A college contemporary of mine has written a story which puts the Karlsruhe judgement into a larger context.
When Angela Merkel joined Emmanuel Macron on Monday to announce their support for a €500 billion pandemic recovery package, she was not only breaking German political taboos and economic orthodoxy, but making a conscious and welcome end-run around the German Constitutional Court (GCC).

A week beforehand the GCC had precipitated what threatens to be a major EU institutional and constitutional crisis by ruling that the European Central Bank, abetted by the Court of Justice of the European Union (CJEU), had exceeded its powers in engaging in "quantitative easing".

This is a form of economic pump-priming involving the buying of bonds by the bank to inject liquidity into markets in danger of freezing up. The GCC struck a potentially crippling blow at what was, and remains, a cornerstone of the EU's response to the financial crisis, an essential monetary instrument of the bank.

The likelihood is that the commission will now agree to take to take infringement proceedings against Germany

The court in Karlsruhe is responsible for overseeing constitutional propriety in Germany, and, in its view, in organisations like the EU to which Germany cedes sovereignty.

In repudiating an earlier CJEU ruling allowing QE, it broke a fundamental principle of EU law, the ultimate supremacy of the CJEU over national courts, a ruling that has delighted Poland and Hungary which are anxious to shake off CJEU oversight.

Crucially, the GCC claimed the ECB had failed to apply a proper test of "proportionality" to its decision to engage in QE and so was underestimating its economic effects.

Under treaty law, the ECB is allowed to engage in monetary activities but is not permitted directly to fund states' spending. Now, in effect, the GCC was saying that because monetary measures like QE - and by the same logic, one Brussels lawyer put it to me, manipulating interest rates - have a substantial economic effect they may be scrutinised by the courts as a form of fiscal subsidy.

The rest of the story is also well worth reading. I have commented as follows:

Thank you Patrick, for adding a bit of perspective to the extraordinary vapourings of Michael McDowell, who also had his fingered rapped by his former teacher, and Supreme Court Justice, Nial Fennelly in the letters section today.

True to his far right political inclinations, Michael McDowell has allied himself with the neo-Nazi AfD and the Hungarian and Polish governments which have sought to undermine the independence of their own judiciaries and the primacy of European law.

He has also made a nonsense of the Irish Constitution, which explicitly states that "No provision of this Constitution" will undermine our Treaty obligations, as interpreted by the CJEU.

In doing so he has sought to dismantle the whole legal order of the EU, so that 27 different national supreme courts can now re-interpret aspects of the Treaties in whatever way pleases them or their political masters.

The political nature of the German court's ruling is underlined by its author, Peter Huber, telling the European Commission not to issue infringement proceedings against Germany should the Bundesbank not simply ignore the German Courts instructions.

And the irony of the whole situation is that the German Court has accused the ECB of failing to properly evaluate "the proportionality" of the economic consequences of its QE programme, when it is any sense of proportionality which is so evidently lacking in the German Courts ruling.

It is as if German Ordoliberal ideology is to be the sole arbiter of ECB actions, and all other economic philosophies have been declared illegal. Not only has the GCC shown itself to be economically illiterate, but politically motivated and judicially absurd.

But of course EU institutions will rightly just ignore the GCC ruling, as has Merkel in her deal with Macron



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat May 23rd, 2020 at 03:26:41 AM EST

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