Germany has made itself a country on which no one can rely

by Nicholas Glinsman

Germany, 75 years after its crushing defeat, goes from strength to strength, shrugging off challenges like a cartoon superhero. Its economy is the strongest in the EU, its trading surplus is the largest in the world, its health system seems to have batted away Covid-19, it has absorbed a million immigrants and now its Constitutional Court has bluntly told the European Union and its Court of Justice that German law is supreme. Imagine Lady Hale venturing a similar pronouncement. As we celebrate the 75th anniversary of VE Day, is it time to recognise that, in the long run, Germany has won victory in Europe?

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If so, it would tell us that there are foundations of power that survive defeats: geography, population, natural resources, culture. Germany’s strength began to emerge with the defeat of Napoleon, even when it was still divided into dozens of states. When Prussia crushed the Austrian and French empires, and in 1871 created a new German reich, its position as Europe’s greatest military power was unchallengeable. In the 1880s it overtook Britain as an industrial producer. Some historians think Britain should not have resisted German aggression in 1914: at huge cost in blood and treasure we managed to delay for only a few decades what would have been an earlier version of the EU. Has Britain now abandoned centuries of effort to resist a continental hegemony and decided to look for global, not European, connections? If German dominance of Europe has been a historical inevitability, has it at last happened, sealed by Brexit?

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It’s a plausible picture, but I don’t buy it. Let’s go back to what was arguably the pinnacle of German success — as long ago as the 1880s. Besides its undoubted military prowess, and its dominance of modern heavy industry (coal, steel, chemicals), challenged only by America, it had hopes of becoming a global power with a great navy and colonies. Perhaps most striking of all, it was in many areas the heart and brain of western culture. Eager intellectuals laboured to learn German, because Germany led in science, philosophy and history, and its universities were the global model. German literature, art and above all music set the tone everywhere. Fashionable Europe flocked to the Rhine and to German spas. This was squandered forever in two world wars. When Britain was dithering over whether to fight in 1914, a group of leading academics protested: “We regard Germany as a nation leading the way in the arts and sciences . . . War against her . . . will be a sin against civilisation.” Little of this admiration remained in 1918, and a cultural revival under the Weimar Republic was eradicated in Hitler’s insane attempt to create a world empire based on terror and genocide.

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Since , Germany has been a regional European state, a military pygmy (to the relief of its neighbours and its own people) and, tragically, in many ways a cultural vacuum. Yes, of course, it has excellent musicians living on past glories (to our great benefit), and Berlin and Munich have a very agreeable nightlife, soon to re-emerge from lockdown. But many young and not-so-young Germans have rejected their national cultural heritage, which, deep down, they feel is tainted. Where else could a 19th-century opera composer be a source of controversy? Germany is no longer “leading the way in the arts and sciences”. Few foreigners bother to learn German, and none, certainly, with the eagerness of 19th-century intellectuals. Germany’s moment as a world power and a world culture has gone, and gone for good. It is a lesser country than it was in 1890.

When we think of Germany today, we think of industry and technology and not much else. There, surely, Germany has reasserted its dominance. Hence its power within the EU, now being emphatically demonstrated at a time of crisis. But think again. German industry is boosted by the cheapness of the euro — its value pulled down by the sluggish performance of the southern eurozone, for whose unemployment and stagnation German exporters should be grateful. If Germany had had its own currency, it would have risen in value to reflect, and counter, Germany’s huge export surplus, which is harmful to the world economy as well as to that of Europe. Without this crutch — and for how long will it last? — Germany’s overdependence on metal-bashing and on exports would be painfully felt.

So is all this a “German racket”, as many believe? I fear it is worse. Europe is threatened not by Germany’s ambition, but by its lack of ambition. Germans do not want to see themselves as the hegemonic power in the EU. European integration was something that was done to Germany to restrain it, not something that Germany did. That has backfired. Consequently, Germany is not the leader of Europe, but merely its biggest member, refusing to shoulder the burdens and duties of leadership, which require taking account of wider interests than its own. The Constitutional Court has given this refusal the force of law. It reflects the mentality of a defeated and shamed nation — perhaps a resentful one. Germany has made itself a country on which no one can rely. Which nations flock eagerly to follow its lead? So the EU is rudderless, and perhaps heading for the iceberg. Germany’s tragedy is Europe’s problem: after losing the war, Germany may now be losing the peace.

So, now let’s consider the Karlsruhe court ruling…

The EU Commission considers suing Germany over the Karlsruhe constitutional ruling!

So, how is Brussels responding to the German constitutional court issuing a ‘declaration of war’ on the EU’s legal order? Well, the European Commission’s “nuclear” option is an infringement procedure against Germany, where Berlin’s government would be taken to court (yes, the European Court of Justice). Ursula von der Leyen, commission president, on Sunday said Brussels “will look into possible next steps, which may include the option of infringement proceedings” in response to pressure for the commission to defend the sanctity of the EU’s legal order against upstart national judges. 

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Franz Mayer, an influential German jurist, makes the powerful case for the nuclear option in Verfassungsblog. He argues that Karlsruhe’s challenge to the ECJ’s supremacy is a blatant breach of EU law. If it continues, Brussels has little option but to embark on a “calm and civilised” infringement process as laid out under EU law, he says. For Mayer, if the commission does not defend the EU’s rule of law, the system risks descending to a “judicial rule of thumb” where the interpretation of the strongest national judges wins. “This will be based on the parameters of size, power, political influence and economic weight of the respective member state,” he warns. For this reason, expect Ms Von der Leyen to keep repeating Brussels’ willingness to take action — including at a hearing with MEPs later this week.

There is legal precedent for a member state to be reprimanded over the actions of its courts. In 2018, France was the subject of an infringementover the failings of its Conseil d’État. But the Karlsruhe moment is of a different order of magnitude altogether — both for Germany and the EU. The decision on an infringement will ultimately boil down to politics and not the law.

Unfortunately, much of the commentary is based on a fundamental misunderstanding. The German court explicitly acknowledged that the ECJ is solely in charge of interpreting European law. The legal dispute is about what happens if a member state accuses the EU of transgressing its powers. The German court has argued member states have conferred specific powers to the EU, but not their sovereignty. Hence, the German court’s obsession with the notion of ultra vires, which is Latin for beyond your competences. The court does not recognise the EU as a federal state structure, but as a devolved agency. It has effectively turned subsidiary on its head. It is this choice of words by the German court that may prove ‘fatal’!!!

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Critically, it is this misunderstanding that informs us why none of the political solutions under discussion are going to work. The EU cannot force Germany to change its constitution. Moreover, the German Basic Law embeds inalienable rights, not subject to change, and some of the court’s claim to jurisdiction is based on that part of the constitution.

What would likely happen if the EU Commission does launch a procedure against Germany under Article 258 TFEU, when a member state is deemed to have failed to fulfil its treaty obligations. The case could then go to the ECJ. However, it is not clear what that would actually achieve. The Karlsruhe decision was taken by a majority of seven judges to one and critically, we do not know on what grounds the one dissenter objected. In other words, there was no minority report.

Furthermore, it is very unlikely that Angela Merkel is going to sort this out. She has just lost a big power battle against the state premiers, who are now effectively running the Covid-19 policy. Merkel has no hold over the court. Even if the government wants to change the constitution, it will not be easy to find a two-thirds majority. It would require not only the full support of the grand coalition, but also support from the Greens and the Left Party. It is safe to assume that AfD and FDP would object. Hence, the fears expressed by the now Bundestag President, Wolfgang Schäuble, to the Frankfurter Allgemeine.

 

English translation – Google:
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Bottom line, there is a real conflict of jurisdictions here. The EU may base its rights in this matter on Article 35.6 of the protocol on the European system of central banks and the ECB in the Treaty on European Union:

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In other words, the Bundesbank is subject both European and German law. On reading the ruling, it appears that the court has made two substantive requests. The first is a request that policy observes the legal principle of proportionality, which requires a very detailed assessment of the impact of the respective policy. However, the more important, substantive request is that the purchasing programmes (QE) have an embedded, firm end date, if they are to be classified as a monetary policy operation, and not monetary financing of national debt. The German court has no explicit problem with the notion of asset purchases. It is the prospect of permanence to which it objects.

Now, who among us actually believes that the ECB would ever taper?!!! They are just not going to ever offload the balance sheet. That would have the case even without the current crisis.

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Now, we should not forget that this ruling from Karlsruhe has implications beyond mere monetary policy. Ma­teusz Mo­ra­wi­ecki, the Polish prime minister, spoke approvingly to the Frankfurter Allgemeine that the German court had given one of the most important rulings in the history of the EU. Poland is also fighting a case brought by the EU, in relation to a disciplinary committee, whose job it is to censure judges. The EU regards this procedure as inconsistent with the notion of an independent judiciary. Hungary is the only EU country where the Covid-19 state of emergency is not time-limited. Much of the dispute between Orbán and the EU is also based on the remit of EU law. Orbán is arguing along lines very similar to that of the German court.

In order to resolve this problem, the only real route appears to be that the ECB will have to compromise, obviously without admitting so in public. If you want to know how the German economic establishment would want to handle the situation, have a look at this article by Helmut Siekmann and Volker Wieland, who also give a good explanation of the legal background to this ruling. These two economists, from the Institute for Monetary and Financial Stability at the University of Frankfurt, are urging the ECB to take a more conservative approach to asset purchases, and to accept that they are temporary instruments.

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How did we get here? Well German conservatives are of the opinion that QE enables fiscal indiscipline and improves the credit ratings of the banks, while low/negative interest rates hurt savers and allow zombie firms t continue to operate. Now, the ECB has repeatedly addressed these fears and argued that they are misplaced. Notably, Isabel Schnabel addressed all these points in a speech in Karlsruhe in February. She argued that negative rates were a structural development beyond the control of the ECB, and that this requires central banks to expand their balance sheets. She also dismissed the supposed side effects of policy: saver expropriation, zombie firms, and asset bubbles. However, Schnabel was not herself an expert witness to the German constitutional court. Most of the witnesses were conservative economists that disagreed with her. Her intervention also came too late to influence the German public debate, where fears about ECB policy had already solidified. Interestingly, Schnabel also imlpied that the ECB would end up having to address this issue of proportionality in its policy review.