Germany Faces EU Backlash a Year After ECB Court Ruling

Germany faces legal action more than a year after the nation’s top court delivered a ruling about the European Central Bank labeled by a lawmaker as a “gift to right-wing populist governments.”

The European Commission kickstarted a so-called infringement case on Wednesday, saying the ruling by the German Constitutional Court set “a serious precedent, both for the future practice” of that court “and for the supreme and constitutional courts and tribunals of other member states.”

The move follows a landmark ruling by judges at Germany’s top court in Karlsruhe last May who accused their counterparts at the EU’s top tribunal of overstepping their powers when they backed the ECB’s controversial quantitative easing policy.

“The German court deprived a judgment of the European Court of Justice of its legal effect in Germany, breaching the principle of the primacy of EU law,” the commission, the EU’s executive arm, said in a statement Wednesday. The escalation is the first step in a longer process, which could ultimately end up in a case at the bloc’s top court in Luxembourg.

The German decision sparked an unprecedented counterattack last year from the EU Court of Justice, which said its entire purpose is to make sure EU law is properly applied across the 27-nation bloc. It said it “alone” has the “jurisdiction to rule that an act of an EU institution is contrary to EU law.”

Germany will now have two months to respond to the commission’s letter laying out its concerns.

Germany’s economy ministry, which handles infringement cases for the country, declined to comment ahead of the EU announcement, as did the ECB.

“The ruling from Karlsruhe at the time was a dangerous gift to right-wing populist governments,” said Sven Giegold, a German member of the Green party in the European Parliament.

“If a supposedly bad justification by the ECB is already considered an ultra vires case, then Hungary and Poland get a powerful instrument against EU law,” he said.

The two nations have faced a barage of criticism from the EU for violating the bloc’s standards for the rule of law.

In its ruling last year, the German constitutional court said the ECB’s multitrillion-euro asset-purchase program, which was started in 2015, might be unconstitutional, and gave the central bank three months to prove that the policy is proportionate to its impact on the economy.

The German decision was seen as a warning shot that could have threatened ECB efforts to counter the economic turmoil of the Covid-19 pandemic.

A December 2018 ruling by the EU Court of Justice that QE was in line with EU rules was “objectively arbitrary” and is “methodologically no longer justifiable,” the German judges said.

The ruling was a direct challenge to the supremacy of the EU court, whose rulings are binding across the 27-nation bloc. The German court said this no longer applies in extreme examples when the EU tribunal fails in its duties.

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