You might have been under the impression that the European Union has quite enough problems to manage. For one thing, there’s a pandemic going on, causing a recession and a debt crisis that might blow up the currency union. For another, two member states, Poland and Hungary, are going rogue, undermining democracy and the rule of law and increasingly seeking conflict with Brussels. I’m not the only one who’s been wondering whether the EU has a future at all.

And now some red-robed judges in Karlsruhe, a city that most people have to search out on Google Maps, have inadvertently made all these problems much more intractable by questioning the European Central Bank’s power to buy bonds for quantitative easing. One effect of the shock verdict by Germany’s constitutional court last week is to hugely complicate the bank’s efforts to keep the eurozone’s economy alive. But the more fundamental consequence is to throw the EU’s entire legal framework into chaos. Yes, the EU now has a full-bore constitutional crisis.

That’s because the court in Karlsruhe, in a historic first, rather glibly overruled a higher instance, the European Court of Justice in Luxembourg, which had previously given the ECB its green light. Can a national court do that? And if so, what would stop other national courts from doing the same whenever they don’t like what the EU says or does? These questions strike at the EU’s core dilemma: Where, ultimately, does sovereignty reside?

Hence two opposing reactions to the verdict: The continent’s europhiles are somewhere between aghast and dejected. Among them is Wolfgang Schaeuble, the eminence grise of German politics. Currently president of parliament and thus Germany’s second-highest ranking official, he was formerly finance minister and helped steer the euro region through its previous debt crisis. Now he worries that the Karlsruhe verdict could threaten the euro area’s survival as a currency bloc and rob the whole EU of its legal authority.

The continent’s euroskeptics, meanwhile, are celebrating. Among them are the governments of Poland and Hungary. For years, they’ve been whittling away at the institutions of free and open societies as defined in the EU’s charters. This month, Freedom House, an American think tank, said they are no longer even classified as full democracies because Poland “has been waging a war against the judiciary” and Hungary has “dropped any pretense of respecting democratic institutions.”

What’s been slowing this Polish and Hungarian descent, however, is the European Court of Justice, which has been berating Poland in particular. So it’s hardly surprising that Poland’s Prime Minister Mateusz Morawiecki wrote an enthusiastic letter to a German newspaper, praising the Karlsruhe verdict as “one of the most important judgments in the history” of the EU because it was a reminder that its member states decide what the EU’s institutions may do, not the other way around. Obviously, he feels that Poland now has carte blanche to ignore Luxembourg’s rulings too.

This is the height of cynicism, of course. The judges in Karlsruhe opined on whether or not an EU institution (the ECB) strayed beyond functions given to it in the EU’s treaties, and in the process disagreed with the interpretation of judges in Luxembourg. That’s awkward, but legitimate. By contrast, the people in power in Warsaw are undermining the rule of law in their own country, in defiance of Luxembourg’s censure. These are completely different situations.

And yet, the cynics will be able to conflate the ECB case with the Polish and Hungarian tangles enough to gum up the EU’s entire legal framework, in effect freezing reform plans while the uncertainty lasts. That’s why the European Commission, the EU’s executive, cannot stand by idly. Its president, Ursula von der Leyen, who happens to be German, has now threatened to sue Germany over the verdict of its court.

“The final word on EU laws is always spoken in Luxembourg. Nowhere else,” she said last weekend, trying to sound tough and strict. And yet, she must know that an “infringement proceeding” by the EU against its largest and most powerful member state would drag on forever and stand little chance of success anyway.

The verdict of the German constitutional court thus spells terrible news for the EU. That’s not because it was legally unreasonable. Instead, it’s because it shines a harsh spotlight on all the EU’s institutional and political shortcomings at the worst possible time, a global medical and economic emergency. The EU’s long-term outlook was already bad before the German judges began reading out their verdict. It’s even worse now.


-Andreas Kluth
Andreas Kluth is a columnist for Bloomberg Opinion. -- Ed.

(Bloomberg)