For decades, Germany's constitutional court has held that there is a national emergency brake to stop the binding nature of EU law where it turns out to violate core constitutional principles. As equivalent principles are also enshrined in EU law, it had never allowed any requests to actually pull this break. Many thought that the mechanism contributed to keeping EU institutions straight on staying within their limits of powers, respecting core fundamental rights and processes.
This changed last week. Germany's top court declared the ECB's program to purchase government bonds on a large scale to be illegal. Not because it was flawed or because the ECB would have gone beyond its powers, but because there was no reasoning that would have balanced the positive effect of inflation closer to the 2% target against the downsides of a long term large scale bonds purchasing program.
So what are the immediate consequences?
- EU institutions have been firm that they will not back down in relation to the ongoing program. The ECB made clear that it is not subject to the German Court's jurisdiction. The European Court of Justice issued a rare press release to remind that it alone is competent to rule on the legality of ECB conduct. The Commission's president announced that the EU is considering infringement proceedings against Germany.
- This battle is spreading from senior judges to policy makers. But it can not really be won by any side. The highest court of the EU has ruled on the issue. There are no exceptions to the binding effect of EU law. Germany's jurisprudence is equally well established. Only a change of the constitution could realistically bring alignment. Further escalation in the form of infringement proceedings and potential penalty payments may lead to a push into this direction. But what if the change does not occur? And what if other Member States try to use their own laws to get out of EU law obligations?
- Below the surface, EU institutions are likely to and should bear the judgment in mind. In many areas, the EU courts have required well reasoned decisions. They have annulled many decisions where they found that the reasoning was not up to the standards. In principle, the two courts apply equivalent standards. One might expect EU institutions and courts to apply an extra dose of rigor. And this may be what the German court intended to achieve. It will not solve this case but it may prevent others along the same lines. It may mean that the EU acts less swiftly and boldly in times of crisis. Or it may just mean longer and more carefully reasoned decisions, that might as a result take more time.
The final word on EU law is always spoken in Luxembourg. Nowhere else.