Usually a decision out of Germany that changes the entire European continent isn’t a good thing. However, in this case, it could represent the biggest institutional upset in the history of the European Union. Miguel Poiares Maduro of the European University Institute’s School of Transnational Governance puts it this way: “It is not the first time that constitutional courts have challenged the authority of the ECJ but never in such a way and with such potential consequences.”
In short, the Federal Constitutional Court, based in the city of Karlsruhe, ruled that, first, the European Central Bank (ECB) was not justified in a decision regarding its public assets purchases program (quantitative easing to stabilize the Euro). And second, that the European Court of Justice (ECJ, the EU’s highest court) was wrong in allowing the ECB to pursue the program. The decision challenges both the EU’s central bank and the superiority of EU law altogether.
Under Mario Draghi, the former president of the ECB (in office from 2011 to 2019), the policy had been that the bank would do “whatever it takes” to stabilize the common currency. The Euro had experienced significant turmoil throughout the 2008 financial crisis and subsequent sovereign debt crisis, which particularly affected Ireland, Greece, Italy, Portugal, and Spain. Through quantitative easing, the central bank, located in Frankfurt, Germany, promised economic stimulus. For instance, in September of last year, the ECB announced a new bond-buying program of €20 billion a month, for as long as it sees fit. This decision notwithstanding, it pales in comparison to the €750 billion it announced to defy COVID-19’s economic impact.
Buying financial assets isn’t new to monetary policy. In fact, during the last financial crisis, in both the U.S. and in Europe, central banks cleared big banks of bad assets on their balance sheets. I would be remiss if I didn’t channel the Austrian economist within me and note that central banking is inherently corrupt: inflation is created by increasing the monetary supply (i.e. printing money, or adding zeros on a computer in the Fed or the ECB), leading to increased prices. Yet central bankers have convinced most of public opinion that the opposite is true by declaring that increased prices are inflation that can only be rectified through monetary policy.
The German ruling will make a dent in the astronomical spending programs of the ECB and call into question the participation of the “Bundesbank,” Germany’s central bank. Beyond that, the court also challenged its presumed “superior court,” the European Union Court of Justice (ECJ). The same plaintiffs—including the Euro-opposing Bernd Lucke, famous for helping to create the far-right AFD party—stated that the German ruling had also gone to the ECJ, to no avail. In its 2018 ruling, the EU court had sanctioned the ECB’s behavior. The German court, however, found the EU in violation of its own proportionality rule, meaning it considers the ECJ to be acting outside of its purview.
The age-old question, quis custodiet ipsos custodes?, “who rules the rulers?” is back.
The judges in Karlsruhe argued that an undemocratic transfer of competencies to the European Union violated the individual rights of German citizens. As Germans have the right to vote, following the principles of democracy, they would need to endorse these spending programs, which could not be made by unelected bureaucrats.
The ruling of the German court thus sets the precedent that EU law does not in fact preempt national law, at least in Germany. It undermines the common currency and the EU’s institutions
Most importantly, there is little the European Commission—which is unsurprisingly displeased with the decision—or Germany, for that matter, can do. Given the German constitution, Berlin has no influence over the court. This has upset pro-EU columnists across the board.
The aforementioned Professor Maduro from European University Institute writes: “In a catastrophic scenario, the precedent of the German Constitutional Court spreads like a virus among national judiciaries. Effectiveness and equality under EU law is undermined and conflicts among national interests will no longer be arbitrated by it but continue through national courts.”
This shows that the construction of the European Union has been built on questionable foundations. If Maduro considers this “virus” to be a probability, then it means that the undemocratic nature of the EU could be legally questioned in all 27 member states. It could even mean that the constitutions of the members were never in line with the EU’s treaties.
At any rate, the German ruling has exposed quite strikingly how fragile the foundations of judicial authority really are. After World War II, the consensus was that the German constitutional court ought to be completely independent of Berlin’s political will. By dragging the court through the mud for having the temerity to question a higher authority, EU supporters run the risk of misunderstanding why the separation of powers was reinstated to begin with. Yes, the EU claims to be the guardian of peace in Europe. But if this peace is achieved by forcing a political will on Germans’ individual rights (i.e. their protection in the highest courts), should Europe really desire it?
A known Batman movies adage comes to mind: “You either die a hero, or you live long enough to see yourself become the villain.”
This article was first published by The American Conservative.
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