4 hours agoMassive EU recovery plan questioned
Periskopi(5 years ago)
(5 years ago)The European Union's plan for economic recovery from the consequences of the Corona crisis has run into an obstacle, as the issue of the constitutionality of the 27-member bloc's shared debt assumption has been raised before Germany's Constitutional Court, CNBC reports. EU member states agreed in July last year [...]
EU member states agreed in July last year to issue joint bonds on international financial markets through the European Commission in order to raise 750 billion euros to ease the negative effects of the coronary virus's pandemic on national economies.
Although EU countries make many political decisions together, each country has full control over its fiscal arrangements. Accepting the joint debt has resulted in controversy for the bloc's conservative fiscal countries, which fear it will result in a greater burden for their taxpayers, broadcast CNBC.
A non-governmental organisation in Germany, the Citizens' Willing Alliance, filed a complaint with the Constitutional Court, declaring European agreements do not allow joint lending.
As a result, a German court on Friday banned a law that would pave the way for the European Commission to enter the debt market and raise funds for the Regeneration Fund.
German judges said they had to make a decision on a temporary ban on the law as a precautionary measure.
“We are aware that the Regeneration Fund is a political project on which a decision has already been made. In view of the considerable risks, however, the federal government must ensure that borrowing at the EU level and avoiding fiscal rules does not become a permanent solution,” said in a Constitutional Court statement.
The German court's ruling was approved despite the fact that 478 out of 645 deputies in the German parliament gave the “green framework” ratification of the law on the EU's joint debt last week.
The American television station also recalls that the EC cannot seek funds in financial markets before all member states adopt the relevant law for such a move.
22 of the 27 EU member states have passed the law so far or must complete the procedure next month. Austria, Poland, Hungary and the Netherlands have not confirmed yet when their parliaments will vote on the law mentioned and a cloud of uncertainty on the issue is now passing over Germany, according to CNBC.
“If this issue is not resolved quickly and the Constitutional Court's decision does not comply with the law that was passed earlier by both German parliament chambers with a large majority, the funding fee could be postponed or even jeopardised,” wrote today Holger Schmidt, the leading European economist at the Berenberg Bank in Hamburg.
