The top judges in Karlsruhe have waved the EU reconstruction fund through. According to the judges, there is no “obvious violation” of German and EU law.
(Photo: dpa)
At the beginning of December, the Federal Constitutional Court waved the EU’s so-called reconstruction fund through. According to the judges, there is no “obvious violation” of German and EU law.
The judges did not see a violation of the bail-out ban, i.e. a cramming out of over-indebted states by the community – although the economists questioned by the court did state that the fund replaced new debt of the member states to a considerable extent. In any case, it is an “exception”. And entering into a transfer union would not be associated with it.
With a detailed minority vote, however, constitutional judge Peter Müller opposes this assessment. He convincingly explains that the reconstruction fund is the start of a permanent and fundamental change in the European financial architecture, which lacks the necessary legal basis – a transfer union through the back door.
There can be no question of “uniqueness”, as it would be naïve to assume that the EU will not use this set of instruments again, said Müller. As if to confirm, the President of the European Commission, Ursula von der Leyen, immediately brought further European debt into play with a view to the US climate subsidy program.
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This continues what we have been experiencing for years. In every crisis, the agreed rules are weakened or disregarded, and the Constitutional Court allows this to happen.
The redistribution within Europe, officially rejected by politicians in Germany under the title “transfer union”, has long been carried out via the balance sheet of the European Central Bank (ECB), for whose liabilities we are liable at least with our share of 25 percent. In this respect, this lawsuit before the Federal Constitutional Court was just as justified as the previous ones against the policy of the ECB.
The euro zone is a debt union in which those who go into debt are rewarded
Nevertheless, the courts are the wrong addressees for the critics of the ECB and the EU. Even when the euro was introduced, German politicians were so naïve as to assume that the obvious shortcomings of monetary union could be cured by expanding the legal system.
The French side rightly thought that the Germans could be granted such regulations because they mean little in reality. Even today, German politicians cling to the law and the treaties, although they have had to experience their ineffectiveness several times and even the highest German court does not set any effective limits.
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A stable monetary union presupposes a European state that receives a large part of the revenue from taxes and social security contributions generated in the area of the monetary union and that runs significant spending programs. It inevitably goes hand in hand with a loss of budgetary autonomy for the Member States.
Daniel Stelter is the founder of the discussion forum beyond the obvious, which specializes in strategy and macroeconomics, as well as a management consultant and author. Every Sunday his podcast goes online at www.think-bto.com.
(Photo: Robert Recker/ Berlin)
The USA shows how it can work: a strong federal state, consistent implementation of the no-bail-out rules for states and a central bank that is not allowed to buy bonds from US states and municipalities.
The euro zone is far from such an arrangement. More and more redistribution mechanisms are being created without the headquarters having a sufficient say in the use of funds and without restricting the budgetary autonomy of the states. It is a debt union in which those who incur debt are rewarded, not those who manage prudently.
At first, politicians ignored the economists’ warning of an incomplete monetary union. Now she does not abide by the law she has set herself. Obviously there can only be one political answer to the challenges of monetary union.
This would require German politicians to develop their own strategy. Simply allowing yourself to be drawn further into the mess of a structurally non-functional monetary union in every crisis and agreeing to further transfers will not save the euro.
Instead of going through the back door, we should implement the transfer union with an amendment to the EU treaties based on the US model – or not at all.
Daniel Stelter is the founder of the discussion forum beyond the obvious, which specializes in strategy and macroeconomics, as well as a management consultant and author. Every Sunday his podcast goes online at www.think-bto.com.
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