Acquitted on the Benefit of Doubt … but not Proven Innocent! The Judgment of the German Federal Constitutional Court on the Next Generation EU Program

Until recently, the recognition to the European Union of the capacity to borrow from capital markets for spending purposes was considered almost inconceivable without a treaty amendment. When borrowing for spending was authorized under the Next Generation EU program to support the recovery of member states from the unprecedented consequences of the coronavirus, it was immediately faced with the suspicion that the pandemic was being used as a pretext to promote the creation of a fiscal and transfer union by the back door in violation of the principle of conferral. In its NGEU judgment, the German Federal Constitutional Court concluded that the authorization to borrow under the program could not be considered ultra vires. However, the ambiguous and controversial reasoning of the Constitutional Court gives rise to uncertainty as to whether the funding and financing model introduced by the recovery program could be used again in the future, beyond the exceptional circumstances of the pandemic. At the same time, it appears that, in this case, the Constitutional Court applied a considerably more restrained version of its ultra vires review compared to its recent case law on the asset purchase programs of the European Central Bank.