Weighing European Integration against Democracy? The German Constitutional Court’s Decision on ECB Operations

Christian Tuschhoff

Free University Berlin

Christian Tuschhoff is an adjunct professor of Political Science at the Free University Berlin. He specializes in topics related to international security, military and defense policy, and transatlantic relations

The German Constitutional Court may have dealt a major blow to European integration when it recently ruled that the federal government and the German parliament had violated the rights of citizens to be protected against potentially negative consequences of the European Central Bank’s (ECB) Public Sector Purchasing Program (PSPP). For the first time in history the Constitutional Court did not accept a ruling of the European Court of Justice (ECJ), rejecting the ECJ’s decision of December 11, 2018, that stated that the ECB’s program did not obviously violate the central bank’s mandate as outlined in the EU treaties.

As the research on European integration has shown, close judiciary cooperation between the ECJ and the national courts in member states has been a key driver of the process toward forming an “ever closer union.” This intense cooperation rested upon two important pillars. First, the ECJ educated national courts in seminars and network meetings in order to receive their cooperation and acceptance of ECJ judgments—the most important precondition of legal unity in the EU. Previously, all national courts accepted the notion that only the ECJ interprets EU law authoritatively. Now, the Constitutional Court finds that the ECJ overstepped the boundaries of its powers granted by the European Union treaties.

The German Court sent a strong message to the ECJ, the ECB, EU member states, and the German government: do not overstep the limits of your mandate but observe the rights of citizens.

Second, the ECJ was careful in not exceeding its limits by strategically assessing whether its rulings would be accepted and supported by national courts. The recent German Constitutional Court ruling is the first instance in which this second pillar of judiciary cooperation broke down as well. By finding the ECJ’s ruling obviously deficient because it violates the principle of proportionality as a shared method of legal interpretation, the German Court sent a strong message to the ECJ, the ECB, EU member states, and the German government: do not overstep the limits of your mandate but observe the rights of citizens. The silent but extremely effective alliance among politically independent institutions—the Commission, courts, and central banks—broke down.

Whether the Court intended it or not, democracy, the public, and organized interests may end up being the winners from its decision. After the Constitutional Court’s ruling the political power will shift away from independent, non-majoritarian (i.e., non-elected) institutions such as the ECB and the ECJ towards majoritarian ones composed of elected officials. Delegating authority to non-majoritarian institutions used to be a convenient method for elected officials to evade having to make unpopular decisions that burden important segments of their constituencies. However, the Constitutional Court indicated that circumventing political accountability has clear limitations. As a result, after the Constitutional Court’s ruling, political power could shift away from independent, non-majoritarian (i.e., non-elected) institutions such as the ECB and the ECJ and toward majoritarian ones composed of elected officials.

Whether the Court intended it or not, democracy, the public, and organized interests may end up being the winners from its decision.

In the future, if governments or parliaments want to spend money on causes that—however necessary—may be unpopular, they will likely face greater public opposition and therefore will need to organize supportive political majorities. Paying the interdependence costs of the common currency, the euro, or the extensive funding of cash-strapped governments through the ECB will need the support of the broader public and the affected interest groups. These funding operations are also likely to become more transparent as they leave the realm of non-majoritarian decision-making and enter the space of public debate in majoritarian institutions. The Constitutional Court’s ruling could strengthen the possibilities for political participation of German interest groups such as life insurers, savers, or tenants that consider themselves negatively affected by ECB operations.

Moreover, democracy could be further strengthened if non-majoritarian institutions are obliged to meet more stringent legitimacy requirements. Typically, these institutions rely on output legitimacy. This means their decisions are approved ex post when the public understands that a policy is the right thing to do, even when the burden on citizens is high. However, the ruling says that courts and central banks must present all the reasons that justify their decisions. Only the ability of the public to evaluate these reasons meets the standards of transparency and legitimacy required for non-majoritarian decisions in democracies. The key reason why the Constitutional Court did not accept the ECJ decision of 2018 was that the ECJ and the ECB failed to publicize their reasons for their decisions to approve the PSPP. As a consequence, no political institutions nor the public could independently evaluate this program and the supporting reasoning. The Court therefore argued that the ECB and the ECJ failed to meet key standards of democracy.

Yet, democratic gains may be balanced over time by the potential for policy failures that jeopardize the stability of the euro and the European Union. Evading public scrutiny of unpopular but necessary decisions might have been choices of convenience for elected officials. However, sometimes they were options of last resort, too, when political majorities in governments or parliaments were out of reach. This problem has been compounded recently as member states’ societies and subsequently national parliaments have become more fragmented and polarized. Under conditions of strained relations between politicians and their constituents, unpopular or painful policies are difficult to approve. Over time, gridlock in national parliaments can erode the euro as the common currency and/or the process of European integration more generally.

Public goods such as a common currency or European integration need to be underwritten by policies that include individual or collective sacrifices.

While the Constitutional Court’s ruling could empower the public and put key decisions back in the hands of elected officials, it ignores the growing divide between states and societies as well as political elites and the general public in Europe. Public goods such as a common currency or European integration need to be underwritten by policies that include individual or collective sacrifices. As the gap between political elites and the general public grows, it is unlikely that electorates will understand the need for these sacrifices or be prepared to accept them. When painful decisions by non-majoritarian institutions are no longer an option, the pressure will be on state-society relations to build new bridges between elites and masses that strongly support the production of common goods.

Legally, the Constitutional Court’s ruling can bind German institutions only. However, their restricted room for operations can indirectly affect the European Union and its other member states. The ruling might limit the extent to which the German central bank can participate in and contribute to the ECB’s bonds purchasing programs. This restriction, however, could jeopardize the political independence of the ECB, its monetary policy operations, and subsequently the stability of the euro. Moreover, other member states could face severe consequences, forcing them to implement stricter austerity programs domestically.

In the end, this chain of consequences could reinforce German dominance in European politics because the burden of economic and social adjustments may move toward weaker southern member states. It is, therefore, no surprise that both the European institutions and member states organized in the “friends of cohesion” group strongly oppose the Constitutional Court’s ruling by using both legal and economic arguments. The Union can work only if no public authority questions its legal unity and primacy. The Euro needs to be based on a more solid economic foundation of solidarity among members. Yet this episode also reveals a key dilemma facing the European Union: strained democratic state-society relations and the promotion of further European integration pull the Union in diametrically opposing directions.