At the end of July, EU leaders struck a deal on a huge coronavirus recovery package after days of bitter talks. The €750billion (£668billion) coronavirus fund, spearheaded by France and Germany, will be used as loans and grants to the countries hit hardest by the virus. The remaining money represents the EU budget for the next seven years.
The talks began with a divide emerging between the hardest-hit nations and those intent on a more “frugal” package of measures.
Denmark, Sweden, the Netherlands and Austria all pushed back on an initial package of grants worth €500billion (£450billion), reportedly causing French President Emmanuel Macron to bang his fists in anger.
But despite coming to an agreement, the package is still causing havoc in member states.
Italy’s government crisis was triggered last month when former Prime Minister Matteo Renzi’s Italia Viva party withdrew its support from the coalition amid a row over how to spend the €200billion (£172billion)-plus that Italy is poised to receive from the recovery fund.
Not everyone in Germany is happy, either.
German MEP Gunnar Beck has furiously criticised the package and argued Angela Merkel is the most expensive Chancellor in the history of his country.
He said: “Merkel is always giving away in the end.
“Paying money to save the euro.
“This whole idea of Merkel’s austerity is very unconvincing.
“She is the most expensive Chancellor in German history.”
He added: “She is obviously paying German money left, right and centre.
“What is happening now is that the whole of Europe is becoming dependent on Germany and to a less extent Northern European money.
“Southern Europe appears to stand no chance at regaining competitiveness.
“It is not a very healthy state of affairs.”
Mr Beck also questioned the legality of the funds.
He explained: “The recovery fund is so expensive and unlawful.
“It is clearly against the wording of 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 the 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, echoed the MEPs’ 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.
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“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.”