ZEW Economist Friedrich Heinemann on the Emergency Appeal Filed Against the EU Recovery Fund

The Federal Constitutional Court has cleared the way for the EU’s 750 billion euro recovery fund in Germany. The actual constitutional suit has, however, not yet been decided. Professor Friedrich Heinemann, research department head and public finance expert at ZEW Mannheim, comments on this matter:

“The pressure on the Federal Constitutional Court from Europe not to stab the Union in the back by blocking its pandemic policy measures was apparently too great. This means that the EU will soon, for the first time, start issuing EU bonds with joint mutual liability of all Member States to fund European debt. This has created a precedent. Even the Court’s promise to make a more detailed review will not change this. It is likely that this will alter the EU in the long run. This is a big step towards a European joint liability union. In the short term, this is good news regarding a rapid EU economic recovery. Whether Europe will benefit in the long run remains uncertain. There is a great danger that the financial solidarity resulting from the new financial instruments will not be matched by adequate control mechanisms at the European level. It is quite possible that the free money from Brussels will even slow down reform processes. It would have been desirable if the German Bundestag, in its ratification act, had shown greater commitment to enforcing more binding reform requirements and tight limits on future new EU debt.”