German Constitutional Court blocks the EU’s 750 bln. euro recovery fund

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German Constitutional Court has blocked the 750 billion euro coronavirus recovery fund, also known as Next Generation EU.

In a surprising move, the German Federal Constitutional Court, based in the city of Karlsruhe, has paused the ratification process of the Own Resources Decision, the legislative instrument that would allow the European Commission to borrow money directly from the capital markets and repay it over the next decades, according to Euronews.

The Own Resources Decision must be ratified by all 27 member states before the Commission can set the recovery fund in motion and distribute the cash in the form of grants and low-interest loans. As of today, only 16 countries have submitted their ratification, with 11 still assessing and debating the bill.

Last Friday, German President Frank-Walter Steinmeier was ready to sign off Germany’s ratification of the legal text, which had received a large, cross-party support in both chambers of the Bundestag, the country’s federal parliament.

But the constitutional court prevented Steinmeir from rubber-stamping the text in order to examine first an emergency appeal filed by the far-right party Alternative for Germany (AfD) and a civic group named Bündnis Bürgerwille, or Citizens’ Will Alliance. Both argue the recovery fund breaches the EU treaties.

Reacting to the news, the European Commission reaffirmed its confidence on the legal validity of the Own Resources Decision. A spokesperson said on Monday that it was “crucial” that all ratifications are in place before the end of June and refused to suggest alternative routes if the deadline is not met in time.

It is unclear how long the German court will take to examine the emergency appeal. It could take weeks or months, perhaps thwarting the Commission’s schedule. For the time being, the process is on hold: Germany can’t proceed with the ratification until Karlsruhe pronounces itself.

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