The German Constitutional Court has done it again. [ Ссылка ] After its shocking ruling of May 2020 that threatened the participation of the German central bank in a vital bond-buying scheme of the European Central Bank, the tribunal has taken aim at another EU-wide initiative: the €750 billion coronavirus recovery fund, also known as Next Generation EU.

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In yet another surprising move, the German Federal Constitutional Court, based in the city of Karlsruhe, has paused the ratification process of the Own Resources Decision, the legislative instrument that would allow the European Commission to borrow money directly from the capital markets and repay it over the next decades.

The Own Resources Decision must be ratified by all 27 member states before the Commission can set the recovery fund in motion and distribute the cash in the form of grants and low-interest loans. As of today, only 16 countries have submitted their ratification, with 11 still assessing and debating the bill.

Last Friday, German President Frank-Walter Steinmeier was ready to sign off Germany's ratification of the legal text, which had received a large, cross-party support in both chambers of the Bundestag, the country's federal parliament.

But the constitutional court prevented Steinmeir from rubber-stamping the text in order to examine first an emergency appeal filed by the far-right party Alternative for Germany (AfD) and a civic group named Bündnis Bürgerwille, or Citizens' Will Alliance. Both argue the recovery fund breaches the EU treaties.

Reacting to the news, the European Commission reaffirmed its confidence on the legal validity of the Own Resources Decision. A spokesperson said on Monday that it was "crucial" that all ratifications are in place before the end of June and refused to suggest alternative routes if the deadline is not met in time.

It is unclear how long the German court will take to examine the emergency appeal. It could take weeks or months, perhaps thwarting the Commission's schedule. For the time being, the process is on hold: Germany can't proceed with the ratification until Karlsruhe pronounces itself.

What are the EU's own resources?
The EU needs revenue to finance its own budget, which operates independently from the national budgets of member states. The bloc has three main sources of revenue, which are called own resources:

A proportion of the gross national income of each member state in line with their level of wealth. This represents the largest revenue source (around 70% of total financing).

A proportion of the value added tax (VAT) collected by each member state.

A proportion of customs duties on imports coming from outside the European Union.

At the beginning of 2021, a new revenue source was introduced: a contribution based on the amount of non-recycled plastic packaging waste (€0.80 per kilogram) to stimulate the transition towards a circular economy.

Altogether, this will materialise in a €1.1 trillion multiannual financial framework for the 2021-2017 period, of which €164 billion will be spent throughout 2021.

The Own Resources Decision is a legal instrument that always accompanies the EU budget and determines how much money the EU is permitted to spend. For the next multiannual period, it will be 1.4% of the Gross National Income (GNI) – up from 1.2% from previous years to compensate the budget gap left by the United Kingdom.

However, after the coronavirus hit Europe and wreaked economic havoc of unprecedented scale, EU leaders unanimously agreed to set up a €750 billion recovery fund. The huge amount of money is going to be raised on the capital markets by the European Commission itself, which enjoys an AAA credit rating, and progressively repaid through the EU budget.

To make this repayments possible, the Own Resources Decision added a temporary increase in the expenses, worth a further 0.60% of the EU's GNI. According to the legal text, this extra 0.60% cap "should expire when all funds borrowed have been repaid and all contingent liabilities relating to loans have ceased, which should be by 31 December 2058 at the latest".

The ratification of the Own Resources Decision has always been particularly lengthy, taking more than two years on average. The provisions of each decision apply indefinitely until a new one has been ratified. This protects the EU budget from delays caused by national debates.

But the urgency brought by the coronavirus pandemic means that, this time, EU member states should expedite the ratification of the new Own Resources Decision if they want to receive the first part of the much-awaited funds before the summer.

[ Ссылка ] #eudebates

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