On Wednesday 21st April 2021 the German constitutional court decided to dismiss legal challenges against the European Union's recovery plan, effectively paving the way for the unprecedented stimulus to be rolled out across the region.
Questions were raised by the highest court in Germany in late March about the EU's plan to raise 750 billion euro’s that is dollar 900 billion in financial markets to fund projects across the block and reduce the economic shock from the COVID-19 crisis.
The move flabbergasted the stimulus and came after a group of Eurosceptic citizens highlighted concerns that the additional borrowing could become a permanent feature in European Union policymaking.
The constitutional court opined that “Limits apply regarding the volume, duration and purpose of the borrowing to which the European Commission is authorised, as well as regarding the possible liabilities incurred by Germany.” Further, the court also stated that the funds in question are to be used exclusively to address the aftermath of the COVID-19 crisis.
The statement from the German Court called attention to the fact that the decision by the 27 heads of state in July is awful temporary nature. This detail is particularly important for eurosceptics, who tend to be concerned about too much integration among the 27 member states of the European Union.
This decision allows Germany to deduce the legislative steps required before the disbursements take place later this year.
Earlier this week, Australia Germany, Estonia, Finland Hungary, Ireland, Lithuania the Netherlands, Poland and Romania had yet to finish the national proceedings before the European Commission is actually able to tap the markets.
A European official told CNBC on Monday that if all goes well the first disbursement could happen in July. And last week an Austrian finance minister Gernot Blümel told CNBC that he is convinced there will be no delay to be able to also emit those European bonds.
The funding is particularly crucial for European nations looking to boost their economies after the pandemic. Although vaccination rates are skyrocketing, some countries are still in lockdown or have tough restrictions in place on the back of the third wave of infections.
The Euro kept trading slightly lower against the US dollar after the announcement and the Greek 10 year government bond hovered around the flat line.
