Brussels, May 6, 2020
On the 5th of May, the German Constitutional Court (GCC, in German: Bundesverfassungsgericht, BVerfG) handed down its highly anticipated judgement on the legality of the Public Sector Purchase Programme (PSPP), one of the pillars of the Eurozone’s Quantitative Easing, ruling that the European Central Bank (ECB) decisions on this stimulus package exceeds EU competences. In doing so, the BVerfG decided to depart from the previous judgment of the European Court of Justice (ECJ), issued in December 2018.
“The decision of the BVerfG has enormous implications on the principle of primacy of EU law and is setting an enormous precedent. Instead of recognizing the binding nature of the ECJ decisions, a signal we would have wished for in these days, this decision risks legitimising the resistance to the enforcement of ECJ decisions on matters concerning the violations of the Rule of Law that we recently had to witness”, says Clara Föller, Member of the board of JEF Germany.
The relationship between the BVerfG and the ECJ has been characterised by ups and downs since the founding of the EU legal order. While participating in a constructive way to further European integration, the BVerfG has nevertheless always expressed reservations on the principle of primacy of EU law, and in some cases even claimed that it will have the last word on matters concerning EU law. “We are disappointed to see that the BVerfG has decided to undermine the fundamental principles of EU law and may have thus finally endangered the development of an ever closer union”, Clara Föller underlines concerning the judgment.
“The decision of the BVerfG, although legally and politically problematic, is not surprising and reveals yet again why a federal Europe is needed. The BVerfG recalls that under the Lisbon Treaty, the Member States remain “masters of the Treaties”, as the EU is not yet a federal union. It is right. But it is also clear that, in light of the COVID-19 health and economic crisis, the EU needs common tools to bring solutions to global financial problems. Yet the Member States decided to limit the ability for the EU to effectively pursue such solutions by rejecting decisive steps towards a federal Europe and abandoning the idea of a Constitution for Europe once more in 2005”, says Emma Farrugia, Vice-President of JEF Europe.
“When it comes to the Economic and Monetary Union, the limits of the Treaties have been definitively reached. The burden of the recovery cannot all fall onto the shoulders of the ECB alone, regardless of the effectiveness of its tools; we now need fiscal policy tools adequate to the size and impact of this crisis, and yet the political will to pursue them still seems to lack. This is why amongst others, Member States need to be more ambitious, this why - again! - we need a federal European Union under one Constitution for Europe”, she concludes.
Background on the ECJ’s preliminary ruling in Case C-493/17 Weiss and Others, and the subsequent decision by the BVerfG on the 5th of May, 2020
This concrete decision of the BVerfG finds its roots back in 2017, when it requested its first ever reference for a preliminary ruling from the ECJ on the legality of the PSPP. The ECJ on 11th December 2018 ruled that the PSPP was primarily monetary policy in nature and thus within the competence of the EU. In conducting its proportionality test, the ECJ ruled that the PSPP did not “manifestly” go beyond what is necessary to achieve its objectives. On the 5th May 2020, the BVerfG took the view that the proportionality test conducted by the ECJ was not thorough, and refused to adhere to such interpretation. It continued by stating that in light of the lack of information attached to how the PSPP functions, it is also unable to conduct a sufficient proportionality test to be able to rule whether the German government and Bundestag (German Federal parliament) were violating their responsibility by failing to terminate Germany’s involvement in the PSPP. Nevertheless, unless the ECB is able to provide information to the contrary, the BVerfG ruled that Germany should no longer participate in the implementation and execution of the PSPP. This decision therefore, undermines the principle of primacy of EU law which is one of the cornerstones of the EU legal order and which has been considered a fundamental principle of EU law since the 1960s. It requires Member States to give effect to EU law, including the decisions of the ECJ, while setting aside their own law in so far as there are any inconsistencies. This allows the EU to function and prevents Member States from arbitrarily setting aside EU law if it doesn’t suit them. The BVerfG’s judgment explicitly rules out its application to the Pandemic Emergency Purchase Programme announced by the ECB on the 18th March 2020.
Background on the Public Sector Purchase Programme (PSPP)
The Public Sector Purchase Programme is part of the wider package of ‘non-standard monetary policy measures’ launched by the European Central Bank (ECB) in the wake of the Eurozone Crisis. The ECB launched the framework Asset Purchase Programme (APP) in mid-2014, with the aim of supporting the smooth functioning of its monetary policy (the “transmission” of monetary policy decisions to the economy). The ultimate goal of the APP is to provide the amount of policy accommodation needed to ensure price stability, the ECB’s primary objective.
Under the APP, the European System of Central Banks (ECSB, or Eurosystem) conducted net purchases of public sector securities (i.e. debt securities issued by the public sector in the Eurozone Member States) under the PSPP, between 9 March 2015 and 19 December 2018. As of January 2019, the Eurosystem maintained the level of securities it is holding in the PSPP portfolio, without increasing it (i.e. it reinvested the principal, but ceased to conduct net purchases). On 1 November 2019, however, due to its assessment of a deterioration of the economic conditions in the Eurozone, the Eurosystem restarted net purchases under the PSPP.
- See here for more information on the PSPP and the ECB’s monetary policy instruments.
- See here for more information on the measures adopted by the ECB in response to the coronavirus pandemic, in all EU languages.
About JEF Europe
The Young European Federalists (JEF) Europe is a non-partisan youth NGO with 13.000 members active in more than 30 countries. The organisation strives towards a federal Europe based on the principles of democracy and subsidiarity as well as respect for human rights. JEF promotes true European Citizenship, and works towards more active participation of young people in democratic life. While the umbrella organisation JEF Europe was founded in 1972, its sections have been operating continuously since the end of the Second World War, making it the oldest pro-European and only federalist youth organisation.
Vice-President of JEF Europe
About JEF Germany
JEF Germany is the German section of the Young European Federalists. JEF Germany has 4,000 members and around 100 local sections all over the country. It has been active since 1949 and thus one of the oldest pro-european, non-partisan youth organizations in Germany. In recent years, JEF Germany has demonstrated, among other things, for open internal borders, stronger commitment of the German government to the European good and more extensive public reporting on the European elections.
President of JEF Germany