by Frank Schnittger
Mon May 25th, 2020 at 03:43:08 PM EST
I am upbraided by an email correspondent for my article on Karlsruhe and German exceptionalism as follows:
Dear Mr. Schnittger,
as long time reader of the I usually agree with most of you opinions. However, your comment on the German decision of the Bundesverfassungsgericht misses by far the point in a few instances.
The major issue of the Judge Huber was that in Germany (and according to Huber also other countries) the Basic Law/constitution sets the highest bar, it cannot be changed by a European court. There was and is a conflict that has to be solved.
"If the German court can be allowed to superimpose its own judgement on an EU policy it doesn't like, what's to prevent all other member states doing the same?" only points to the fact, that you do not understand the issue. To complain that a German judge points to this conflict is therefore weak, the EU is not one country, it is a union of sovereign states, that causes problems. Ignoring the problems solves nothing.
"Is the Merkel/Macron proposal for the EU to borrow and spend 500 Billion a direct response to the Karlsruhe ruling?"
Again a miss by a wide margin. There was never a discussion whether there is support for the countries hit hardest by the corona visrus epidemic, only the legal framework was. The judge Huber did NOT exclude some means, he only requested a better reasoning, this should be easy for the EU. And a larger EU budget as suggested for the 500 billion EUR is of course perfectly within the legal framework given by judge Huber.
"Far from being slow to condemn Karlsruhe, Ireland should be equanimous about the prospect of Germany leaving the Eurozone, if that is what it really wants to do, as the logic of the Judges ruling seems to suggest."
Best regards in the hope to read high quality article in future again.
Taking a few of the points in turn:
Point 1: "The major issue of the Judge Huber was that in Germany (and according to Huber also other countries) the Basic Law/constitution sets the highest bar, it cannot be changed by a European court."
We are talking here about the actions of the ECB, which is an EU institution created by the Treaties and subject only to EU law. The Huber judgement also explicitly tries to overturn case law created by the CJEU since 1964 and calls a CJEU ruling on the matter absurd. It is welcome to its opinion, but cannot enforce it on the CJEU.
The primacy of EU Law over national law and the CJEUs pre-eminent role in interpreting it is enshrined in Annex 17 of the Treaty of Lisbon.
Other countries, including Ireland, for example, explicitly acknowledge this in their own constitutions:
Article 29.4.6 of the Irish Constitution
6º No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State, before, on or after the entry into force of the Treaty of Lisbon, that are necessitated by the obligations of membership of the European Union referred to in subsection 5 of this section or of the European Atomic Energy Community, or prevents laws enacted, acts done or measures adopted by--
i. the said European Union or the European Atomic Energy Community, or by institutions thereof,
ii. the European Communities or European Union existing immediately before the entry into force of the Treaty of Lisbon, or by institutions thereof, or
iii. bodies competent under the treaties referred to in this section,
from having the force of law in the State.
So by your logic that EU law is subservient to German Basic Law, and with Irish law being explicitly subservient to EU law, Ireland is now effectively being ruled by Germany?? This will be news to many here.
Point 2: "EU is not one country, it is a union of sovereign states"
It is a union of sovereign states which have agreed by Treaty to pool certain aspects of their sovereignty and to vest decision making authority in those areas in the 7 institutions of the EU, including the ECB and CJEU. Why do you think the Brexiteers were so intent on escape from under the yoke of the CJEU? They recognised that British law is subservient to EU law for as long as they remained a member.
Point 3: "There was never a discussion whether there is support for the countries hit hardest by the corona virus epidemic, only the legal framework was. The judge Huber did NOT exclude some means, he only requested a better reasoning, this should be easy for the EU."
The initiation of the German constitutional case pre-dates the Covid-19 pandemic and is concerned largely with opposition to the Quantitative Easing programmes initiated by Draghi, which have had the economic effect of reducing interest rates paid by net deficit countries such as Italy, and reducing interest received on savings by net savers such as Germany.
It is therefore understandable that many in Germany should oppose QE, even though it is actually necessitated by German insistence on running net export and current account surpluses which force other EZ countries into deficits. (You cannot have a surplus without a corresponding deficit elsewhere. Normally these are balanced by currency re-valuations and devaluations, but that is not an option in a common currency area).
Governments such as the US and UK rectify such imbalances through net fiscal transfers from richer states/regions to poorer ones, something which is now also, belatedly, being proposed by Merkel/Macron. But in the past and current absence of such fiscal transfers, the EZ has had to rely ever more heavily on the ECB to rectify those imbalances, although QE has also been used, increasingly by the FED and Bank of England to prevent large parts of their economies falling into recession.
If Mr. Huber needs this explained to him, then fine. Any competent economist not trained exclusively in the ordoliberal tradition can do so. But it is not the function of the ECJ to do so as it is not answerable to the German Constitutional Court and what it regards as "proportionate" or otherwise. That debate is had at ECB Board meetings where Germany remains free to vote against any further QE programmes.
Manipulating interest rates is part of the basic policy tool-kit of any central bank in controlling inflation and preventing recessions: Not too many Germans were complaining when the ECB kept interest rates artificially low to help fund German re-unification, even though those ultra low interest rates led to an otherwise avoidable property and asset boom and greatly exacerbated the 2008 crash in Ireland and other EU member states.
The reality is that any ECB policy will be more or less appropriate for the economic interests for any one member state at any given point in time. That is the compromise inherent in any common currency covering widely divergent economies.
Mr. Huber went far further than just requesting a better explanation. He explicitly rejected previous CJEU rulings as absurd and declared that Germany should not be subject to them. If Germany has not properly inserted the primacy of EU law into its constitution, that is a problem for Germany to resolve. It is Germany's membership of the EU and EZ that is put in question by Mr. Huber, no one elses.
You do not appear to realise how grave an insult Mr. Huber's ruling is to the rest of the EU, and how it cannot be left to stand if the whole legal order of the EU is not to be undermined. Merkel recognised this, but in typical Merkel fashion chose to skirt around the issue by proposing a fiscal stimulus package instead. It does not look good for any government to oppose a finding by its supreme court.
However the ECB will ignore the ruling and the CJEU may take a long time to slap it down, unless some court case or other gives it an opportunity to do so. The European Commission will probably only bring infringement proceedings against Germany if the Bundesbank fails to meet its obligations under the Treaties. The findings of a rogue national constitutional court are of no direct relevance to it.
But it would be a pity if Germany were to join Hungary and Poland in the queue with infringement proceedings pending against it. The political nature of Mr. Huber's ruling is laid bare by his warning to the European Commission not to initiate infringement proceedings against Germany. Again, he has absolutely no standing to tell the Commission what it should and shouldn't do.
If the ECB wants to give Mr. Huber an opportunity to climb down, perhaps Philip Lane, ECB chief economist, will issue some ex-cathedra statement on the economic impact of QE measures which are widely credited with saving the EZ from recession. The EU usually finds some way to muddle through a crisis without explicit compromising its principles or endorsing extreme positions.
But you can expect much more QE in the years ahead if the Pandemic is not to result in an even deeper recession. The Eurozone's survival, and indeed Germany's position within it are at stake.
In strictly legal terms, if accepted, M. Huber's ruling is a greater threat to the EU than Brexit ever was, as it undermines the EU legal order. In political terms, it will give encouragement to the AfD and raise fears in the rest of the EU that Germany is again becoming too dominant within Europe and threatening to impose its will on others by fair means or foul. In economic terms it is arrant nonsense, and threatens the future of the Euro. In social terms it threatens ever greater inequality and injustice within an EU where citizens of poorer states are expected to endure abject poverty and lack of basic healthcare so that Germany can continue to enjoy export supremacy and financial surpluses.
It shall not stand.