Germany’s high court ruling accelerates EU coming apart

By Brian Williams
June 1, 2020
German court bars EU from using Berlin’s funding to bail out impoverished governments like Italy and Spain. German rulers offer instead to help EU make grants, accompanied by austerity regimens. Above, Nov. 6, 2012, rally in Greece against EU-imposed cuts on wages, pensions.
Sakis MitrolidisGerman court bars EU from using Berlin’s funding to bail out impoverished governments like Italy and Spain. German rulers offer instead to help EU make grants, accompanied by austerity regimens. Above, Nov. 6, 2012, rally in Greece against EU-imposed cuts on wages, pensions.

The economic and social crisis of capitalism weighing on working people worldwide, accelerated by the way the capitalist governments have responded to the coronavirus outbreak with far-reaching lockdowns on industry and trade, has greatly hastened the coming apart of the European “Union.”

In an unprecedented move, Germany’s highest court ruled May 5 against the validity of the European Central Bank’s nearly $3 trillion bond-buying “stimulus” scheme. The court says it unduly interferes with the German rulers’ sovereign prerogatives. This decision signals Berlin taking steps towards abandoning the euro and return to the mark, its former national currency. This would tear the EU apart.

The insistence of EU bureaucrats in Brussels that they have the power to deploy member countries’ contributions to rescue crisis-ridden neighbors has become too much of a burden on the German capitalist class’s ability to pursue its own imperialist interests and maximize its profits.

In the ruling, the German court declared null and void a 2018 judgment by the European Court of Justice upholding the ECB’s bond-buying program. This scheme allowed the bank to print money to bail out EU member governments with some of the highest debts, including Italy and Spain. The ECB has purchased more than $2.9 trillion in corporate and government bonds over the past five years through this “stimulus” scheme.

The rulers in Germany have used the EU for decades to their advantage, sucking up profits at the expense of bosses — and on the backs of workers — in the weaker European capitalist powers. They aren’t about to let things start flowing the other way.

Either Germany’s rulers must pull back from this decision, Wall Street Journal columnist Walter Russell Mead wrote May 13, “or it must begin to think through the process of minimizing the fallout from the currency’s failure.”

The German court ruling gives the European Central Bank three months to try and make a case that these purchases should be continued. If it fails, Germany’s central bank, which contributes large amounts of the money used for the “stimulus” program, will cut off all funds.

This is the first time in its history that a ruling by the European Court of Justice has been challenged by an EU member state, let alone by its most powerful one.

European Commission President Ursula von der Leyen challenged the German court decision in a May 10 statement, raising the possibility that EU bureaucrats will file a lawsuit in the European court seeking to stop Berlin from violating “EU law.”

The German court’s “judgment amounts to a unilateral declaration of constitutional independence from the EU legal order,” the Financial Times editors announced May 13, backing von der Leyen. “Some have already compared it to South Carolina’s nullification of federal law in pre-civil war America.”

On May 18 Berlin joined Paris to propose a $546 billion coronavirus “recovery fund.” The European Commission would borrow the funds and offer grants to the most indebted of the bloc’s governments, to be paid off after 2027. But to get a grant, an impoverished government would need to agree to a harsh austerity regime.

European Central Bank President Christine Lagarde said this does nothing to solve the crisis the German court ruling poses for the EU. “The German central bank is under obligation to carry out the ECB’s decisions,” she said.

EU bureaucrats’ pipe dream

The EU was constructed to counter the competition of U.S. imperialism and rebuild capitalist exploitation in Europe after the mass destruction of the second imperialist war. It was built on the pipe dream that by uniting disparate governments in Europe it could, over time, grow into a continent-wide juggernaut of a superimperialist state. But the European “Union” is comprised of 27 separate capitalist states, in which the ruling classes pursue their own interests in search of markets and profits at the expense of their rivals.

The 1999 establishment of the euro as a common currency — today shared among 19 EU members — advanced the ability of the stronger north European powers, primarily Berlin and to a lesser degree Paris, to profit from plundering working people in the weaker eastern and southern European nations that have lower levels of industrial and economic development.

These differences have been sharply accentuated as the crisis of capitalism has deepened. During the first three months of this year, the economy of countries using the euro shrank 14.4% — its fastest pace on record.

The sharpest divergence in the contraction was between the EU’s north and south regions. While the German economy shrank by 2.2%, Italy’s gross domestic product fell by 17.6% and Spain’s by 19.2%. Facing sharpening competition and rising government debts, the capitalist rulers in each of these countries seek to make workers pay for this crisis, stepping up attacks on jobs, wages and working conditions.

The Italian rulers, who presided over one of the wealthier founding members of what became the EU, today face ballooning debts and growing inability to pay back wealthy bondholders. Rome’s public sector debt was 136% of its gross domestic product at the end of last year.

Top credit agencies like Moody’s are considering putting a “junk” label on Italian debt, including $2.6 trillion of its government bonds. The German capitalist rulers don’t want to be left holding the bag, with the European Central Bank looting their finances to bail out the Italian and other weaker, increasingly insolvent, ruling classes.