German court dismisses challenge to 750 bln euro EU recovery fund

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BERLIN — Germany’s constitutional court on Tuesday threw out a legal challenge to the European Union’s 750-billion-euro ($786 billion) recovery fund, which saw the bloc take on joint debt to help member states overcome the COVID-19 crisis.

The ruling will feed into debate on whether the EU can take on joint debt for other crises in the future, at a time when the Ukraine war and the resulting energy stand-off with Russia are forcing member states to announce costly relief programs.

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ZEW economist Friedrich Heinemann said the decision delivered a boost to those who support such an approach, adding: “Pressure from Brussels will now grow on the (German) government to clear the way for debt financing of new EU programs.”

The recovery fund, dubbed Next Generation EU, allowed the European Commission to raise up to 750 billion euros on capital markets and pass on the money to member states through payments linked to jointly agreed reform and investment plans, partly as grants and partly as loans.

The funds are to be repaid from the EU budget over the coming decades, with Germany shouldering by far the biggest share of any member state.

Tuesday’s ruling rejected two constitutional complaints against legislation passed by the Bundestag parliament in March 2021 to ratify the massive funding program.

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The complaints were brought by Bernd Lucke, co-founder of the eurosceptic Alternative for Germany (AfD), who left the party after it drifted further to the right, and Heinrich Weiss, a businessman who once served as the head of Germany’s industry lobby group BDI.

The court ruled that the ratification act had not violated their right to democratic self-determination nor did it “impair the overall budgetary responsibility of the Bundestag.”

Lucke expressed his disappointment at the ruling but said it was positive that the court had emphasized the strictly exceptional nature of the joint debt.

The German finance ministry’s parliamentary state secretary said the program had been the correct response to the pandemic while adding that it was never intended as a budgetary tool.

“This is not a blueprint for future measures,” said Florian Toncar, who represented the ministry in court. ($1 = 0.9541 euros) (Reporting by Ursula Knapp, Christian Kraemer; writing by Rachel More; Editing by Paul Carrel, Frank Jack Daniel and Catherine Evans)

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