German court rejects lawsuit against EU fund

LONDON – The German constitutional court on Wednesday decided to dismiss legal challenges against the EU recovery plan, paving the way for the unprecedented stimulus being rolled out across the region.

Germany’s highest court has asked in late March questions about the EU’s plan to raise 750 billion euros ($ 900 billion) in financial markets to fund projects across the bloc and thus stem the economic shock of the Covid-19 crisis. reduce.

The move hurt the much-needed stimulus and came after a group of Eurosceptic citizens expressed concern that the extra loan could become a permanent feature of EU policy.

“The limits apply to the scope, duration and purpose of the loan to which the European Commission is authorized, as well as the possible obligations that Germany has entered into,” the constitutional court said in its opinion on Wednesday.

“In addition, the funds involved should be used exclusively to deal with the aftermath of the Covid-19 crisis,” the court also said.

The statement from the German court emphasizes that the decision by the 27 heads of state in July is of a temporary nature. This detail is particularly important for euroseptics, who tend to worry about too much integration between the 27 EU member states.

Wednesday’s decision allows Germany to complete the necessary legislative steps before the disbursements take place later this year. As of last week, Austria, Germany, Estonia, Finland, Hungary, Ireland, Lithuania, the Netherlands, Poland and Romania have not yet had to complete the national proceedings before the European Commission is able to exploit the markets.

A European official, who did not want to be named due to the sensitivity of the process, told CNBC on Monday that if all goes well, the first payouts could take place in July.

Austrian Finance Minister Gernot BlümeI told CNBC last week: “I am convinced that there will be no delay in being able to issue the European bonds as well.”

The financing is especially important for European countries that want to boost their economies after the pandemic. Although vaccination rates are creeping across the block, some countries are still under surveillance or there are strict restrictions on a third wave of infections.

The euro traded slightly lower against the US dollar after the announcement, and the ten-year Greek government bond hovered around the flat line.