On March 26, 2021, the German Federal Constitutional Court (GCC) held that the Own Resources Resolution Ratification Act (ERatG) must not be executed by the Federal President for the time being. In doing so, it temporarily averts the danger of taking a path to a fiscal union that as will be argued in this post, is contrary to EU law. What is behind this, and what is to be thought of the questions of EU law raised in this procedure? The article addresses whether the European Own Resources System and the Corona Reconstruction Fund conform with EU law. As will be shown in this post, the EU may have acted ultra vires (i.e., outside its authority). In particular, the possibly insufficient earmarking of the Own Resources System and the Corona Reconstruction Fund, as well as the high-liability risk for the member states, are problematic. If such an ultra vires act were to exist, the GCC would, under its established case law and the German constitution, deny this EU program its effect in Germany and thus, in effect, finally stop the entire Corona Reconstruction Fund.
More on the domestic constitutional problems of the case can be found in the article from Verfassungsblog, which deals in particular with the violation of Germany’s constitutional identity.
The subject of the summary proceedings is the Own Resources Decision Ratification Act. This is the German law approving the financing of the European Union until 2027. It is the legal basis for the entry into force of the current Own Resources Decision of the European Union of December 14, 2020. The Own Resources Decisions of the European Union are based on Article 311 (3) TFEU and, in addition to other revenue, serve to finance the EU budget. The current Own Resources Decision enables the European Commission in Article 5 (1a) to take out loans of up to 750 billion euros with a term of up to 38 years. With these funds, the European Union intends to temporarily use 750 billion euros within the framework of its NextGenerationEU economic stimulus package to repair the immediate economic and social damage caused by the Corona pandemic. The most important instrument in this stimulus package is the Recovery and Resilience Facility, which will provide 627.5 billion euros in loans and grants to support reforms and investments in the countries of the European Union. Implementation of the economic stimulus packages by the European Union is only possible once all Member States have ratified the Own Resources Decision (Article 311 (3) sentence 3 TFEU).
The German Bundestag approved the Own Resources Ratification Act on March 25, 2021. The vote was preceded by a heated debate, during which the Minister of State at the Federal Foreign Office described the Own Resources System “as a necessary and overdue step towards a fiscal union”.