May 15, 2020 |
One week after the German constitutional court’s (BVerfG) ruling that part of the European Central Bank’s sovereign bond-buying programme may be illegal under the German constitution, the ruling continues to reverberate across the EU’s political, economic and legal circles.
The political repercussions to the Karlsruhe-based Court were immediate, with both the European Commission and ECB taking note of the ruling and arguing that the BVerfG had no jurisdiction on the matter and reiterating the supremacy of EU law and the European Court of Justice.
European Commission President Ursula von der Leyen further underlined this sentiment on Saturday by reiterating that “the final word on EU law is always spoken in Luxembourg. Nowhere else” while also announcing that the EU’s executive arm may launch an infringement procedure against Germany over the ruling.
The BVerfG’s chief justices, in rare interviews last weekend, argued that they did not intend to undermine the EU, its legal order or the eurozone. Chancellor Merkel seems less convinced. Speaking to the German Bundestag on Wednesday, Ms Merkel commented that the ruling obliged her Government “to act responsibly and wisely so that the euro can continue to exist.” Adding that “this will indeed spur us on to do more in the field of economic policy to promote integration,” the Chancellor also stressed the need for a closer political union to ensure the full functioning of the monetary union.
As such, the BVerfG’s ruling may actually lead to a shift in the German Government’s position on further integration of the eurozone, something long called for by economists and EU-politicians to address the structural shortcomings of the EU’s single currency. They argue that the EU’s limited ability to respond to the 2008 economic and sovereign debt crisis, as well as the slow economic growth since, are due to the inherent structural deficits of having both an economic and monetary union, but no functioning political union for coherent decision making.
Besides the full development of an EU Banking Union and Capital and Markets Union, those calling for further eurozone integration also want to see a eurozone Finance Minister overseeing a significant eurozone budget. Nevertheless, while Germany will hold a financial services-focused Presidency of the Council of the EU in the second half of this year, it would be too ambitious to expect any significant moves towards further eurozone integration during that time.
Compliments of Vulcan Consulting – a member of the EACCNY.