The German Court rejects the EU pandemic recovery fund’s legal challenge

The German constitutional court dismissed legal challenges to the EU’s recovery plan, essentially paving the way for the region’s unprecedented stimulus to be implemented.

In late March, the German High Court raised questions about the EU’s plan to raise €75 billion in financial markets ($900 billion) to fund bloc-wide project financing and thereby reduce the economic shock caused by the Covid 19 crisis.

A bunch of Euro-skeptics emphasized the concerns that additional borrowing could be a permanent feature in European policymaking and this shift threw a corner at the necessary stimulus. “Limits apply to the amount, length, and intent of the borrowing to which the European Commission is authorized, as well as to any potential liabilities incurred by Germany,” the constitutional court wrote.

The funds are also to be used solely to resolve the aftermath of the Covid-19 crisis, according to the court. The German court’s statement emphasizes that the July decision by the 27 heads of state is only temporary. This information is especially significant for Eurosceptics, who are worried about the EU’s 27 member states being too integrated.

The decision helps Germany to complete the required legislative measures until disbursements later this year. Austria, Germany, Estonia, Finland, Hungary, Ireland, Lithuania, the Netherlands, Poland, Romania, and the European Commission had yet to complete national procedures until the European Commission could tap the markets as of last week.

The money is especially critical for European countries that are trying to recover from the pandemic. Despite the fact that vaccination rates are improving across the EU, some countries are either under quarantine or have stringent restrictions in place as a result of a third wave of infections.

Following the announcement, the euro continued to trade marginally lower against the US dollar, and the Greek 10-year government bond hovered around the flatline.

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