EU braces for chaos as German lawyer lays into recovery fund: ‘Absolutely illegal!’

Varoufakis issues warning on ‘puny’ EU recovery fund

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The EU’s recovery fund is at risk of suffering long delays after the Commission judged that most national spending plans submitted so far still need work to get approved. Germany’s submission is among those deemed to fall short of expectations, while southern European nations such as Greece and Spain appear to have the strongest plans. Officials familiar with the discussions noted some countries have not even made proposals at all yet.

The German government is said to be in talks with the Commission to reduce some of the hurdles to investment in its plan.

A Commission spokeswoman said that staff are in “intensive dialogue” with member states as they seek to make disbursements starting from mid-2021.

But, she added, “it is also essential” that these plans meet the key objectives of the fund.

The slow progress with the €750billion (£668billion) fund threatens to slow the region’s recovery, and it highlights how the EU is lagging behind other advanced economies.

The bloc is already struggling to step up coronavirus vaccinations and extended lockdowns mean it is running at only about 95 percent of its pre-pandemic output.

In contrast, the US his week passed a $1.9trillion (£1.6tn) fiscal stimulus package that will see cash reaching citizens’ bank accounts within days.

The EU economy is only likely to reach its pre-pandemic size in 2022, a full year after the US.

According to German lawyer and politician Dr Peter Gauweiler, Brussels’ recovery fund could run into trouble for another reason, though, which appears to be much more serious.

Dr Gauweiler argues it is “absolutely illegal”.

In an exclusive interview with, the lawyer harshly criticised the package and explained: “In the end, it is contrary to the structures of the European treaties.

“Fiscal law should not be Europeanised because of the bigger legitimisation basis of the national parliaments.

“It’s absolutely illegal.”

When asked if a member state could then halt the plan, Dr Gauweiler added: “Every country has its own legal protection mechanisms.

“Here in Germany, it is the constitutional complaint, which every German can bring to the German Constitutional Court if his right to vote is impaired.

“And our line of reasoning is that the right to vote is undermined by these measures.

“Especially in the area of fiscal law for example.

“And these are the levers with which you can attack these decisions – the agreement of your own government about these decisions.”

German MEP Gunnar Beck echoed Dr Gauweiler in another interview with, in which he questioned the legality of the fund.

Mr Beck said: “The recovery fund is so expensive and unlawful.

“It is clearly against the wording of the articles 310 and 311 of the Treaty of the Functioning of the EU.

“They clearly state that the EU is not allowed to take debt on the financial market

“It is a breach of treaty.

“It is a breach of the EU constitution.”

The Treaty on the Functioning of the European Union is one of two treaties forming the constitutional basis of the European Union, the other being the Treaty on European Union.

Article 310 reads: “With a view to maintaining budgetary discipline, the Union shall not adopt any act which is likely to have appreciable implications for the budget without providing an assurance that the expenditure arising from such an act is capable of being financed within the limit of the Union’s own resources and in compliance with the multiannual financial framework referred to in Article 312.”

Caroline Heber, senior research fellow at the Max Planck Institute for Tax Law and Public Finance, put forward similar claims in a recent entry for a blog from the University of Oxford.

She wrote: “According to the principle of conferral, which underpins the EU, the EU acts only within the limits of the competences conferred upon it by the member states in the Treaties to attain the objectives.

“Consequently, any action by the EU must be based on a sufficient authorisation to act granted within the EU Treaties.

“This also applies to the issuing of bonds on the financial markets by the Commission on behalf of the EU.

“The EU Treaties do not confer a general power to borrow on the EU.”

At times, the lack of a general power to borrow has not prevented the EU from issuing bonds on the financial markets.

The EU has usually used the flexibility clause to overcome its lack of a fundamental borrowing competence.

However, Ms Heber noted, the flexibility clause cannot provide a sufficient legal ground for the issuing of bonds for the recovery fund.

She added: “Unlike past examples, the funds are not limited to passing on the benefits of the EU’s credit rating to the member states.

“The borrowed funds are intended to finance transfers via economic policy measures and, although they may be covered by EU policy areas, there can be no doubt that this massive redistribution has an impact on the overall structure of the EU. Such a momentous borrowing and use of funds via the recovery fund cannot be based on Article 352 TFEU.

“As a result, the EU does not have sufficient competence to issue €750billion (£668billion) bonds to finance the recovery fund.”

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