Lagarde Wants Quick Fix to German Blockage on EU Recovery Fund

European Central Bank President Christine Lagarde is counting on a legal attack against Germany’s ratification of the European Union recovery fund to be “dealt with in short order” to allow the region to get urgent fiscal support.

“We very much hope that it will be deployed in the second half of 2021,” she said in an interview with Bloomberg Television when asked about the EU’s 750-billion-euro ($880 billion) recovery package. “When exactly it will begin is for member states to determine because it is for them now to ratify the instrument.”

Lagarde hopes that the legal challenge in Germany will be resolved quickly “so that we have certainty as to what the outcome is. I don’t want to pre-judge but I certainly hope there is a way to deliver on what was agreed,” she said.

Germany’s constitutional court last week put the law authorizing the nation’s participation in the recovery fund on hold to weigh an emergency request seeking to block the legislation. The case was filed on behalf of political group Buendnis Buergerwille, which said the EU shouldn’t be allowed to issue debt to finance its recovery program.

The delay allows the judges to look into whether they need to issue a preliminary order that could then take years to be fully resolved. Such steps aren’t uncommon, and an interim ruling on the matter could arrive within days.

Any move to block Germany’s participation in the fund could still pose a risk to the region’s stimulus plan, which consists of desperately needed grants and loans primarily aimed at the worst-hit nations. Lagarde stressed that a combination of supportive fiscal and monetary tools is essential for driving the recovery.

©2021 Bloomberg L.P.

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