A. The Roots of the Solange Jurisprudence

What originally had been qualified as a mere ‘querelle allemande’,Footnote ⁹ in the following decades accompanied and, in many ways, also steered the whole European integration process. At first sight, it might seem awkward that this conflict broke out in Germany because this country has been, in the first years of the European integration process, among the staunchest supporters of this process and the German Constitutional Court fully supported this political attitude. The understanding of the German Federal Republic as an antithesis to the Nazi terror regime, an idea so vividly expressed by the BVerfG in the ‘Wunsiedel Order’ of 4 November 2009,Footnote ¹⁰ was, at least implicitly, an essential element of the Constitutional Court's self-perception, and a maximum of opennessFootnote ¹¹ towards European integration should be an important means to implement this ambition.Footnote ¹² This pro-European attitude was, however, not a consistent one. It was rather subject to continuous mood changes depending on external developments, such as economic crises, as well as on the influence of individual opinion leaders. It may be no coincidence that the spreading of Euroscepticism in Germany towards the beginning of the 1970s went in parallel with the end of the ‘economic miracle’ (‘Wirtschaftswunder’) that had transformed a Germany in ruins after World War II into a prosperous, economically leading country.

Among German Public Lawyers, Professor Hans-Heinrich Rupp (1926–2000) became the main opponent of European Community law's supremacy pointing at a ‘structural incoherence’ between European Community (‘EC’) law and German national constitutional law.Footnote ¹³ The Solange I judgment of 1974Footnote ¹⁴ gave full expression to this new, critical vision about the relationship between EU law and German national (constitutional) law.

The immediate bone of contention was fundamental rights protection. There can be no doubt that the German ‘Grundgesetz’ provides for a high level of protection. German lawyers regularly take much prideFootnote ¹⁵ in this and a rather ‘introverted’ perspective taken by some German constitutional lawyers in these circumstances is exalted.Footnote ¹⁶ In a certain way, fundamental rights protection became the most distinguishing feature of German constitutional law, a quality that distinguished this national legal order from EC law in a decisive way, being suited also to provide moral superiority to this constitution.Footnote ¹⁷

In the following, both parties seemed to recognise the explosiveness of this situation. In the Solange I judgment, the BVerfG put into jeopardy Van Gend en Loos Footnote ¹⁸ and the very concept of primacy of EC law, while also the EC and, respectively, the ECJ, claiming the role of this order's main legal interpreter, had to admit an open flank when it had next to no response to the criticism that the EC lacked meaningful human rights protection provisions. This deficit had become all the more acute in view of its expanding fields of competence and activity.

The ECJ managed to overcome the contested deficit in human rights protection by an astute manoeuvre, namely by extracting fundamental rights from the national constitutional orders and transplanting them as ‘general principles of EU law’ into the EU legal order. This approach had already been started earlier,Footnote ¹⁹ but Solange I had given the decisive impetus to intensify further this process.Footnote ²⁰

When, more than a decade later, the BVerfG was again confronted with this issue, in the Solange II case,Footnote ²¹ this Court could refer to the jurisprudential developments that had taken place in the preceding years and acknowledge that fundamental rights protection provided by the EC was ‘substantially similar to the protection of fundamental rights required unconditionally by the Basic Law’. As a consequence,

At first sight, this judgment set an end to a long diatribe. It could even be argued that this judgment implied the acceptance of the ECJ's jurisprudence pre-eminence by the BVerfG. The conditions set by the BVerfG to the acceptance of this prerogative could be interpreted as merely formal and abstract with no real-life implications as it was unrealistic that the EC would again fall back behind the standards achieved.

The subsequent developments, however, proved this impression wrong. The struggle for the last word on issues of basic constitutional relevance was reignited a few years later. Thereby it became clear that the controversy standing at the basis of the Solange jurisprudence had not been a mere attempt to safeguard the high fundamental rights protection standard of the Basic Law but the perception of legal if not moral pre-eminence within the European legal order revealed to be of a much broader scale. The Solange jurisprudence had demonstrated that such a challenge was possible, that it could be conducted in a way no other European constitutional Court could dare to do, and that it had led to an outcome that the BVerfG could sell as a success for Germany. The German Constitutional Court had been able to impress its own understanding of the rule of law on the whole EC. With the job done in the field of fundamental rights protection, attention shifted to other areas, in part to protect characteristics of the German constitutional order against EC/EU harmonisation tendencies, in part to impose typical German values on the whole Community/Union. Eventually, in the PSPP dispute, it was basic principles of the economic philosophy prevailing in Germany that should be transferred to the Union as a whole, thereby also imposing a specific model of solidarity and of economic and fiscal policy useful specifically for this country.

B. The Maastricht Judgment of 12 October 1993

In this discussion, the Maastricht judgment of 1993 was a turning point.Footnote ²³ This treaty implied the most far-reaching step ahead in the European integration process since its inception—and for some it was too far-reaching. Thus, before the BVerfG a series of individual complaints was lodged against the German federal statute ratifying the Treaty. The complaints were dismissed but the BVerfG used the opportunity to make some obiter dicta that should rebalance the relationship between the Union and the Member States (more specifically: Germany) in a decisive manner:Footnote ²⁴

• – The BVerfG reiterated its willingness, already expressed in Solange II to guarantee fundamental rights protection ‘in cooperation’ with the ECJ, but at the same time the German Constitutional Court asserted its intention to exercise this control also against the European Union.Footnote ²⁵ As it was appropriately said, this statement sounded more as an announcement to exercise ‘final control’ than as an offer for cooperation.

• – Particular emphasis was laid on the consideration that no ‘Kompetenz-Kompetenz’ was conferred to the European Union. Therefore, an extensive interpretation of EU law by the ECJ also would lack a competence basis and therefore not be binding on Germany.Footnote ²⁶

• – Community Acts going beyond the conferred powers would not be binding on Germany and could be controlled by the German Constitutional Court.Footnote ²⁷

The Maastricht judgment laid bare the inconsistencies resulting from the fact that the EC, on the one hand, had evidently international law origins and should necessarily have limited powers (principle of conferral) and, on the other hand, the EC was claiming autonomy and a sui generis status.Footnote ²⁸ The BVerfG opted for a ‘return to the international law roots’ that should also protect Germany's sovereignty (and that of the BVerfG) to the utmost. This attitude was further emphasised by the Union's qualification as an ‘association of States’ (‘Staatenverbund’) to be distinguished from a state proper.

Dogmatically, it is not possible to easily dismiss this perspective, even though if applied to the European integration process from the very beginning it would have made this process next to impossible. What the BVerfG wanted to achieve was to retain control over the European integration process at an important juncture where this process seemed to head for a significant intensification. To achieve this end, the challenge was twofold:

• – First of all, the BVerfG had to extend its control activity beyond the fundamental rights issue. EU competences had become so vast that infringements with basic elements of the German constitutional order should become possible in a broad array of fields not always and not easily attributable to the fundamental rights area. The BVerfG became now interested in the protection of national legislative competences in general, even though only fundamental breaches should justify intervention. In this context, the ultra vires doctrine was developed: the German Constitutional Court should make sure that the EU is not overstepping its competences, otherwise these acts should not display any effect on German soil.

• – The next challenge was to create a legal mechanism that would allow the Court to oversee and control this relationship between EU law and national law in a continuous way, with such an instrument clearly lacking in the given constitutional order. True, there was the possibility that such an issue would come up in a proceeding among supreme federal bodies,Footnote ²⁹ but the factual possibility of such proceedings are rather remote—not least because the traditional ‘Europe friendliness’ characterising the whole German constitutional order and political system, still constitutes a strong barrier to act in such a way for political bodies. Therefore, a new instrument had to be created—only based on case law.

It is tempting, therefore, to interpret the findings by the BVerfG as to the newly identified individual right to complaint against integration measures on the basis of Article 38 GG in this light.Footnote ³⁰ In fact, the most distinguishing feature of the Maastricht judgment with the most far-reaching effect may exactly be found in the findings on the enlarged admissibility of individual complaints against integration measures or, more precisely, their implementation by Germany. As a legal construct, these findings seem hardly convincing and were met with harsh criticism by German constitutionalists.Footnote ³¹ The German Constitutional Court managed, however, to develop an individual complaint basis not explicitly foreseen in the Constitution and conceived in a way so to become strictly shielded against any attack by the Parliament. It also formed the basis for the PSPP complaint.

To this end, the Constitutional Court referred to the right to vote enshrined in Article 38 GG and interpreted this right not only in a procedural way but also in substantive one:

The individual is promoted to be the guardian as to whether the European integration process corresponds to the German constitution:

By the connection of this (newly found) material contentFootnote ³³ of Article 38 with Article 20 (1) and (2) (constitutional principle of democracy) and Article 79 (3) (inadmissibility of constitutional changes regarding the principle of democracy—‘eternity clause’ (‘Ewigkeitsklausel’)—and the recognition of an individual right to complaint to effectively safeguard this right, the BVerfG created a powerful instrument making sure that questions of European integration would be presented to this Court on a continuous basis. In fact, it can be taken for granted that there will always be at least a few individuals taking issue with the further integration process and willing to present a complaint before the BVerfG. This ‘subjectivisation of objective law’, as it was called,Footnote ³⁴ lasts, however, for the first step of this procedure—it regards only its setting in motion. It will then be the Constitutional Court to decide whether to retain this complaint as admissible or not and subsequently whether to accept or to dismiss it. This strategic re-interpretation of the concept of subjective rights risks imperilling fundamental rights protection as a whole.Footnote ³⁵ Reference to the ‘eternity clause’ in Article 79 (3) should have as a consequence that this right to complaint would become eternal in itself with the German Parliament not being allowed to abolish it even by legislative measures.

There are limits within which competences can be transferred to the European level: the people's right to democratic self-determination must not be lost by this process. On the basis of this perspective, Germany could never become part of a fully integrated European Union, of a European state. The BVerfG sees itself as the guardian of a people's right to democratic self-determination defined along national lines. European integration does not thereby become impossible but the ‘essence’ of national self-determination has to be preserved. What does this essence mean? The BVerfG tried to define this in the following jurisprudence—with ambivalent results.

As set out above, this whole jurisprudence, the very assumption of an individual right to complaint, was met with harsh criticism in literature. It is hardly convincible to argue that limits implanted into the GG in view of Germany's experiences with a totalitarian regime should now constitute the basis for limitations as to European integration.Footnote ³⁶

C. The Lisbon Decision of 30 June 2009Footnote ³⁷

The next major attempt by the BVerfG to regain control over the European integration process can be found in the Lisbon decision of 30 June 2009. By this decision, the BVerfG enlarged the purview of its examination introducing the so-called ‘identity control’. This control power goes beyond the traditional question of whether the Union respects its competences (a question well-known to any federal system) as it encompasses also the question whether competences the Union can formally exercise actually violate the ‘identity’ of the GG. The material reference point of this ‘identity control’ are the inderogable guarantees in Article 23, paragraph 1, sentence 3 in connection with Article 79 Abs. 3 GGFootnote ³⁸ and—with regard to EU law—Article 4 (2) of the Treaty on European Union (‘TEU’).

In substance, the BVerfG becomes thereby the ultimate umpire in relation to political decisions regarding the European integration process. Even if the judgment about the identity of Germany's constitutional order may concern only core characteristics (the ‘inviolable core content’), it will always be the Constitutional Court who defines this identity and violations thereof. The BVerfG claims for itself the right to steer this integration process like no other European Constitutional Court does. It suffices that a citizen expresses his discontent about the ongoing integration process in a formally correct complaint before the Constitutional Court and the BVerfG is free to set in motion the whole legal control process and even to sever the relevant legal links with the European Union if the free development of the German people in its main cultural traits is endangered. No other Constitutional Court of the Union has ever claimed such prerogatives. No government, not even the German one, has ever presented reservations of such a kind in occasion of one of the various treaty reforms. It is rather the BVerfG as a ‘border institution’ (‘Grenzorgan’)—a supreme judicial institution located at the border between the judiciary and the political organsFootnote ³⁹—that identified these limits setting barriers to transfer powers and competences to the European Union.

The headnotes of the Lisbon decision clearly set out this vision—with formal bows towards ‘Europe friendliness’ but in substance claiming prerogatives against the EU that find no basis in positive law. Here is an excerpt:

What is the ‘sufficient space’ for a Member State ‘for the political formation of economic, cultural, and social living conditions’? Does it not constitute a denial of the traditional understanding of European integration trying to carve out such areas of ‘national self-determination’? And what is even more disturbing: how can it be that a Member State even takes into consideration not to respect its treaty obligations if they stand in contrast to a rather nebulous ‘identity’ requirement autonomously defined by its Constitutional Court?Footnote ⁴⁰ These questions are still unsolved and they have come prominently to the fore in the PSPP proceeding as will be set out below.

Previous to this escalation, however, attempts were made by the Constitutional Court itself to limit the damage done.

D. Banana Market Organisation Footnote ⁴¹ and Honeywell Footnote ⁴²

Both the Maastricht and the Lisbon decisions constituted unprecedented attempts to assert the German Constitutional Court's prerogatives against the ECJ, causing disconcert all over Europe. In both cases the subsequent jurisprudence by the BVerfG attempted to calm the waves and to set a step back.

In the Banana decision, taken shortly after the rapporteur of the Maastricht decision, Paul Kirchhof, had left the Court, the BVerfG stated the following:

According to the BVerfG, the complaint should have contained a detailed statement that ‘the protection of fundamental rights required unconditionally by the Basic Law is not generally assured in the respective case. This requires a comparison of the protection of fundamental rights on the national and on the Community level similar to the one made by the Federal Constitutional Court in BVerfGE 73, 339 (378–381)’.Footnote ⁴⁴

As shown above, in the Lisbon decision the BVerfG evidenced again a much broader will to control the European integration process. In relation to Lisbon, a great step back was taken in the Honeywell decision, which gave rise to the hope that the conflict with the ECJ could be definitely resolved in an amicable way.

The BVerfG clearly ruled that ultra vires review can only be considered if a breach of competences on the part of the EU is sufficiently qualified. According to the BVerfG, such a ‘sufficiently qualified violation’ is given if the EU is manifestly in breach of competences and the impugned act leads to a ‘structurally significant shift of competences to the detriment of the Member State’.

Single violations of Member States’ competences by the EU therefore do not constitute an ultra vires breach and even a multitude of such violations do not, at least not automatically. It is rather the case that a ‘structurally significant shift of competences’ has to occur. Therefore, the individual breach of competences is not of relevance but rather permanent, ‘constitutional’ changes in the federal system of the European Union that are changing the ‘identity’ of the Member States in violation of their right to self-determination. Conceived this way, the Solange diatribe would be converted into a true dialogue between the Union and its Member States, whereby the prospect of an outright rupture would become very remote—only fundamental violations of the constitutional consensus lying at the basis of the European integration process would generate such a conflict, and in this case rightly so.

The year 2010 seemed, therefore, to have brought peace and stability in the relations between the Union and its Member States. The main problem with this situation was, however, that in the Solange dispute it has always been the BVerfG who has dictated the conditions for peace and conflict, who blew hot and cold. In 2010, exactly when a permanent truth seemed to be in sight, the overall economic conditions in Europa were set to change profoundly and new measures of solidarity seemed to be necessary if the Economic and Monetary Union (‘EMU’) should be enabled to survive. In Germany, this led to controversial debates and opposition to a ‘solidarity union’ or a ‘debt union’ grew continuously. On this basis, requests for economic and cultural self-determination within the European Union found an ideal breeding ground.

At first, the BVerfG showed restraint, as it felt to have no power to judge measures adopted by the European Union but this approach was later abandoned with the Solange I judgment where the BVerfG asserted its power to examine Community Acts as to their conformity to (German) fundamental rights standards. Solange II made the actual case for such a control less probable but nevertheless the possibility of such a control was upheld. As to this point no substantial change was brought about by the following jurisprudence (in particular Maastricht, Banana Market, Lisbon, and Honeywell). The BVerfG returned to a more deferential approach towards EU law (at least formally) only in the EFS (‘Greek bailout’) judgment of 2011Footnote ⁴⁵ and, more pronouncedly (though grudgingly and with many caveats), in the OMT judgment.Footnote ⁴⁶ The BVerfG declared itself competent only for the assessment of national acts. At first sight, this seems dogmatically correct. In practice, however, not only the dividing lines between Union law and national law become blurred and what ‘national implementation’ means is open to much controversy but the BVerfG does not even in principle fully stick to this position.

As to the first point, Judge Gertrude Lübbe-Wolff has acutely remarked that it can hardly fall into the competence of the BVerfG to judge about a mere omission of certain governmental behaviour on the Union level, first of all because of the political nature of such acts and the legal indeterminacy of the situation the judge would have to confront, a situation even more accentuated if transnational law is at issue.Footnote ⁴⁷

As to the inconsequentiality of the BVerfG, it has to be remembered that the ‘identity control’ also concerns measures that formally fall into the competence by the EU but should not have been transferred into the EU's competence because thereby core constitutional characteristics (of the German legal order) are violated. In such a situation, the BVerfG's jurisdiction concerns squarely EU acts.Footnote ⁴⁸

E. Heading for Escalation: The OMT Quarrel between BVerfG and ECJ

The Outright Monetary Transactions program (‘OMT’) dates back to the year 2012 when the European Central Bank (‘ECB’) announced its preparedness to operate on the secondary sovereign bond markets with the aim of safeguarding an appropriate monetary policy transmission and the singleness of the monetary policy.Footnote ⁴⁹ OMTs shall be part of European Financial Stability Facility/European Stability Mechanism macroeconomic adjustment programmes or precautionary programmes and be based on strict and effective conditionality.Footnote ⁵⁰ Already, the announcement of this possible future financing activities had considerable calming effects on the Eurozone finance markets,Footnote ⁵¹ which were previously in rough waters. These announcements, which were actually never implemented on the practical level, caused fears, especially in Germany, as to a possible circumvention of Article 123 TFEU (prohibition of monetary financing of Member States), the creation of a ‘debt Union’ and the intrusion by the ECB into the Member States’ economic policy competence. Following a complaint against Germany's participation in these measures, the BVerfG, on 14 January 2014, asked the ECJ for a preliminary ruling, the first ever in its history. As it was said, this ‘request’ resembled rather a ‘dictate’ where the BVerfG seemed to pretend that the ECJ had provided confirmation of its more or less outspoken rejection of these measures.Footnote ⁵² The ECJ, however, in its Gauweiler judgment of 16 June 2015,Footnote ⁵³ did not follow this path and rather explained what were the conditions an asset purchase program had to fulfil were it to be found to be in conformity with EU law—conditions that the OMT program evidently fulfilled. For the BVerfG, this judgment became a face-saving device in the sense that it took up these conditions in a more restrictive form and transformed it into a highly demanding parameter for future assessments of similar purchasing programs.Footnote ⁵⁴

It was therefore only a question of time, before this ‘high-tension dialogue’ should have been taken up again—now, however, with sharpened instruments the BVerfG deemed to have at its disposal. The immediate impulse came from the so-called ‘Public Sector Purchase Programme’. This bond-buying program differed, however, under several aspects from the OMT programme:Footnote ⁵⁵

• – The OMT programme was conceived as an immediate financial crisis response with regard to specific Euro countries in need of urgent help and prepared to accept a set of conditions.

• – PSPP is not ‘selective’ like OMT measures were intended to be but rather a general monetary instrument intended to stabilise the Euro zone as a whole and to guarantee the monetary transmission mechanism.Footnote ⁵⁶ Consequently, it does not aim at the purchase of specially affected Euro countries like the OMT programme but bonds of all Euro countries shall be bought in proportion to the single Euro country's ECB share.

• – The OMT programme did not know any limit in volume (according to Draghi's ‘whatever it takes saying’) but ironically there was no need to implement it because this bold announcement already sufficed to reassure the markets without the need to spend any euro. By contrast, the PSPP has actually been implemented in practice.Footnote ⁵⁷ As the ECB set out in its press release of 22 January 2015, these measures were aimed at fulfilling the ECB's price stability mandate. ‘[T]his programme will see the ECB add the purchase of sovereign bonds to its existing private sector asset purchase programmes in order to address the risks of a too prolonged period of low inflation’.Footnote ⁵⁸

The ECB attempts to operationalise the goal of price stabilityFootnote ⁵⁹ with ‘inflation rates of below, but close to, 2% over the medium term’.Footnote ⁶⁰

While price stability, as such, has traditionally been a central battle cry for the advocates of German monetary sovereignty, with regard to the PSPP programme, they surmised that in reality this instrument had totally different aims and effects: in their complaints before the BVerfG presented in 2015 and 2016, they accused this programme of violating the prohibition of monetary financing of national budgets according to Article 123 TFEU, of being primarily an economic policy instrument going beyond the competences of the EU in general and of the ECB in particular, and of being detrimental to specific German economic interests. In view of the far-reaching differences between the OMT and PSPP programmes, with the latter widely taking into account the criticism presented against the former, the BVerfG could have easily dismissed these claims. The German Constitutional Court, however, declared them as admissible and issued a preliminary reference order on 18 July 2017. In this order, the BVerfG changed tactics: it was no longer the admissibility of the securities purchasing programmes as such the Constitutional Court focused at but it were rather the modalities of their implementation as to which doubts were raised.Footnote ⁶¹ What at first glance might appear to be a gesture of at least partial deference, at a closer examination revealed to be an approach of insidious characteristics: it is extremely difficult to determine whether, on the technical level, there are such specific modalities and of what kind they should be. Or to put it differently: by directing the discussion into such uncharted waters it became far easier for the BVerfG to impose criteria for bond-buying programmes the EU (or, in practice, the European Central Bank) was not able or not prepared to fulfil. By declaring them as non-derogable minimum standards and as core constitutional criteria, a fundamental conflict between the German constitutional order and the EU system could be provoked without there being any convincing solution at hand.

The preliminary questions presented by the BVerfG to the ECJ were mostly unproblematic as they have been answered, by and large, already by previous preliminary rulings, in particular by Pringle Footnote ⁶² and Gauweiler.Footnote ⁶³ The most delicate questions concerned, however, the exact distinction between monetary and economic policy as well as the question whether and how a proportionality test should be taken recourse to assess whether monetary instruments having also effects in the field of economic policy can find application.

In Weiss,Footnote ⁶⁴ the ECJ has given, as far as possible, answers to these questions. As the BVerfG has stated afterwards in the PSPP judgment, these answers were insufficient and ‘simply not comprehensible’, and the Weiss judgment was therefore dismissed.

Maybe the ECJ should have taken heed of the advice by the Italian Government, which opined that the ECJ should declare the request for a preliminary ruling inadmissible as the referring court in any case would not accept the ruling as binding and consider itself ultimately responsible for deciding on the basis of the GG.Footnote ⁶⁵ In the end, this was exactly what happened.

A. Conflicting Positions and Conflicting Readings of the Controversy

By the PSPP judgment of 5 May 2020, the unthinkable became real: the breach between BVerfG and ECJ, throughout the whole Solange dispute only a theoretical option, a menace in order to steer ECJ jurisprudence and EU bodies’ activities in a direction more adherent to German constitutional policy, had now become a fact both the European Union and its Member States have to deal with.

This judgment provoked an enormous stir all over Europe: in politics (both national and EuropeanFootnote ⁶⁷), in the judicial area,Footnote ⁶⁸ and in the academic world.Footnote ⁶⁹

This judgment lends itself to two readings: a ‘Unionist’ one (contrary to its main finding) and a ‘German constitutionalist’ one (in favour of them, evidently in the minority). Both perspectives could be further differentiated but let us, in a first moment, juxtapose them neatly (and in most cases these positions were clearly defined).

On this basis, a consensus or a compromise between these two opposite camps can hardly be found.

The ‘Unionists’ contend two major violations:

• – The bindingness of preliminary rulings by the ECJ is no longer accepted

• – The autonomy of the ECB suffers a major inroad: the BVerfG takes the liberty of second-guessing the ECB's institutional decisions which, as a matter of rule, should fall into this institution's autonomous powers.Footnote ⁷⁰

The ‘German constitutionalists’ adopt a completely different perspective when they try to defend the BVerfG's right to ‘autonomous assessment’ of measures that in any way are either outside EU competences (and then we are confronted with an ultra vires situation) or raise an ‘identity’ issue, when they concern EU measures that touch upon the constitution's ‘inviolable core content’.

Both positions leave many questions open. As will be shown below, it may not be possible to state what is the ‘right’ position, even though the ‘German constitutionalist’ is surely not tenable, at least not in its radical form, if present achievements of European integration are to be preserved. At the end, this confrontation mirrors a deeper cultural and political clash about the future of European integration. It is a conflict about pre-dominance resulting from ‘constructive ambiguity’Footnote ⁷¹ nested into pivotal norms regulating EMU. And this ‘constructive ambiguity’ is, at the end, an expression of the conflicts mentioned before and still unresolved notwithstanding the introduction of the European Stability Mechanism, the adoption of the Fiscal Pact, and several salvage packages. It will be argued here that a definite solution of the conflict made apparent by the PSPP can be solved, if at all, only by a new compromise to be transformed into positive primary law, introducing new mechanisms of solidarity,Footnote ⁷² and new perspectives for the further development of the European Union.

B. The Reach of BVerfG Jurisdiction: Does It also Encompass EU Law?

The PSPP judgment can be seen as the final act in a long controversy over enhanced solidarity measures in favour of some states of the Euro zone, which were severely hit by the economic and financial crisis. This assistance met with growing criticism within the German population amid a continuous flow of press reports—often referring to renowned German economic experts—which portrayed these aids as economically senseless and detrimental for Germany.Footnote ⁷³

What should actually be the object of BVerfG control, if anything, found diverging answers by the Court, and these answers give rise to doubts up to this day.Footnote ⁷⁴

C. The Main Findings

During the procedure in the PSPP case before the BVerfG, many confided that eventually the German Constitutional Court would continue its policy of a constructive dialogue with the ECJ.Footnote ⁷⁵ Although when the procedure was re-opened before the BVerfG after the ECJ had issued the Weiss judgment, observers noted a frozen climate and an attitude openly adversarial towards the ECJ.Footnote ⁷⁶

The main findings of the PSPP judgment were the following:

• – The BVerfG found no definite evidence for prohibited monetary financing of Member States according to Article 123 TFEU. According to the BVerfG, as to this point, the ECJ's arguments ‘raise considerable concerns’ but nonetheless they ‘can still be considered tenable from a methodological perspective’.Footnote ⁷⁷

• – Radical criticism is voiced against the ECB for launching and continuing the PSPP programmeFootnote ⁷⁸ while disrespecting the principle of proportionality. For the BVerfG, this instrument, qualified as monetary tool, may in reality have disproportional effects in the field of economic policy.

• – This criticism is as such problematic—one has to ask how the BVerfG dares to criticise the autonomous exercise of the ECB's functions. Next follows a contorted reasoning by the BVerfG about the nature and the consequences of the PSPP decisions taken by the BVerfG. At paragraph 117, they are definitely qualified as ultra vires, but at paragraph 116, the BVerfG states that ‘it cannot yet be definitely determined whether the ECB decisions at issue satisfy the principle of proportionality’.Footnote ⁷⁹

• – The failure by the ECJ to control the activity by the ECB adequately, thus resulting in ultra vires acts, is qualified in sharp tones: ‘simply not comprehensible’,Footnote ⁸⁰ ‘simply untenable’,Footnote ⁸¹ ‘not comprehensible and thus objectively arbitrary’,Footnote ⁸² and ‘no longer tenable from a methodological point’.Footnote ⁸³

• – The Federal Government and the German Bundestag are accused of being in breach of the constitution for ‘failing to take suitable steps challenging that the ECB [in launching and continuing the PSPP programme] neither assessed nor substantiated that the measures provided for in [the relevant] decisions satisfy the principle of proportionality’.Footnote ⁸⁴ As explained above, already in a procedural sense, such a finding is highly problematic as it is based on the assumption that the BVerfG may challenge acts of omission by political organs notwithstanding the broad discretion they may have in this area. Furthermore, to ground such a claim on a right to democracy, self-determination (Article 20(1) and (2) GG) and free elections (Art. 38 (1) GG) and to consolidate it in the ‘eternal clause’ according to Article 79 (3) is far-fetched to say the least.

• – The BVerfG identified a constitutional obligation by the Federal Government and the Bundestag ‘to take steps seeking to ensure that the ECB conducts a proportionality assessment in relation to the PSPP’.Footnote ⁸⁵ Following a transitional period of no more than three months allowing for the necessary coordination with the European System of Central Banks (‘ESCB’), the Bundesbank may no longer participate in the implementation and execution of the relevant ECB decisions, unless the ECB makes good for its previous (purported) deficits in reasoning.Footnote ⁸⁶ One is left to wonder how these steps the Federal Government and the Bundestag and BVerfG seem to be obliged to shall appear in practice, given the fact there is no official communication channel between these institutions. In practice, all these institutions could issue declarations as they deem fit and continue with the PSPP without these facts having any immediate effects. Only in a new procedure, in what would seem to be an infinite regress, the BVerfG could examine whether the measures taken were sufficient (or, perhaps, ‘proportionate’).

• – While, in case of the ECB, figuratively we could speak of a ‘release on parole’ (even though the ECB might question jurisdiction as well as the meaning of the obligations imposed and how to fulfil them) the condemnation of the ECJ was without parole and associated with strong morale reproach: according to the BVerfG the Weiss judgment was—in the parts referring to the proportionality issue—‘simply not comprehensible’ and therefore rendered ultra vires.Footnote ⁸⁷ The delimitation of competences was ‘simply untenable’,Footnote ⁸⁸ the interpretation of the Treaties ‘simply not comprehensible and thus objectively arbitrary’.Footnote ⁸⁹ By its inobservance of the principle of proportionality, according to the BVerfG, the Weiss judgment of 11 December 2018 ‘manifestly exceeds’ the mandate conferred to the ECJ by Article 19(1), second sentence TEU ‘resulting in a structurally significant shift in the order of competence to the detriment of the Member States. To this extent, the [Weiss Judgment] constitutes an ultra vires act and thus has no binding effect (in Germany)’.Footnote ⁹⁰ By this formula, the BVerfG activated the ‘Honeywell clause’,Footnote ⁹¹ revealing at the same time all its weaknesses: what was thought to be a formula that would lead to the ascertainment of an ultra vires act only in extreme situations of a constitutional breach by EU institutions or by national organs implementing EU law, in reality translates into a blanket formula allowing the German Constitutional Court to identify such a breach in nearly any situation if this Court so wishes. This formula is of no real material substance. The ‘structural significant shift in the order of competence to the detriment of the Member States’ happens if the BVerfG says so. It is the BVerfG that can activate the rupture if it feels like it.Footnote ⁹² And in order to exclude any doubts as to these asserted powers, the BVerfG also re-adapted the Honeywell formula: while the Honeywell formula is based on some sort of ‘error tolerance’, in the sense that some violations might be acceptable without generating a constitutional conflict, in the PSPP judgment, this accommodating element is no longer mentioned.Footnote ⁹³

D. The Distinction between Monetary and Economic Policy

At the core of the whole legal controversy that has led, according to the BVerfG, to a ‘structurally significant shift in the order of competence’ and to ultra vires acts by the European Union not applicable in Germany and with no binding effects in relation to German constitutional organs, administrative authorities, and courts,Footnote ⁹⁴ stands the question how to distinguish monetary and economic policy. While the TFEU might not be fully clear in this regard, much additional confusion has been created by the jurisprudence of the BVerfG over the last few years. It is this jurisprudence that attempts to come to grips with a complex economic issue by legalistic constructions widely apart from the economic reality.

As is well known, the structure of EMU widely reflects German preferences and experiences with stability policy based on a strong central bank giving priority to price stability and opposing state financing and shared financial liability.Footnote ⁹⁵ In imposing this orthodoxy, the German Government operated out from a penumbra between law and politics, where national pride over an apparent success story with a strong currency met with elements of the German constitution seemingly requiring the government to maintain this policy.Footnote ⁹⁶ Accordingly, monetary policy became in Article 119 TFEU an exclusive EU competence with the primary objective of price stability, topped off with the obligation to support the general economic policies in the Union. The problem is, and it is here where the misunderstandings with mostly German lawyers start, that monetary policy is part and parcel of economic policy. The idea to distinguish them neatly is unrealistic, and gives, if anything, proof of little economic knowledge.Footnote ⁹⁷ In a certain sense, this situation appears to be a caricature of an interdisciplinary discourse gone awry. The formula chosen in Article 119 TFEU is intended to allow the introduction of a common currency without harmonising national economic policy, a step too far in an EU that wants preserve core sovereign characteristics of Member States and, first of all, national budgetary responsibility.

This has as a consequence that there is no state financing and no common budgetary responsibility. As it seems, ‘economic policy’ means different things to different people in different situations. A good, legally and economically sound interpretation of Article 119 TFEU has been provided by Advocate General Cruz Villalón in the Gauweiler caseFootnote ⁹⁸:

Similarly, but perhaps even a little more generous to discretion of the ECB, Advocate General Wathelet states in the Weiss case the following:Footnote ¹⁰⁰

Contrary to the stance taken by the BVerfG, the Advocate General is of the opinion that ‘indirect effects’ of a monetary measures (on economic policy) have to be accepted even if they are foreseeable.Footnote ¹⁰² The ECJ supported this position.Footnote ¹⁰³

Fully appropriately, the ECJ, referring to the ECB's explanations during the procedure, stated that instruments of monetary policy that aim at safeguarding and restoring an appropriate monetary policy transmission must necessarily have certain effects on the real economy: it is their very function!Footnote ¹⁰⁴ A successfully conducted policy of this kind will also change the refinancing costs for states—another point of criticism by the BVerfG as to the PSPP programme. The PSPP programme has been qualified—like the OMT programme previously—as an instrument to ‘unblock’ interrupted monetary policy transmission channels to the real economy.Footnote ¹⁰⁵ This does not, however, transform this instrument into (prohibited) instruments of economic policy, even if this means easing refinancing conditions for states.

As economic literature has shown very clearly, monetary policy instruments designed to unblock interrupted monetary policy transmission channels regularly lower refinancing costs for governments.Footnote ¹⁰⁶ This additional growth stimulus is generally welcomed and intended, notwithstanding the fact that refinancing costs for governments no longer fully reflect previous risk calculations. Economists wonder which monetary policy would be allowed if such effects had to be excluded: ‘Any easing of monetary policy facilitates further state indebtedness’.Footnote ¹⁰⁷

But what about the principle of proportionality on which the BVerfG has put so much emphasis? In fact, according to the BVerfG, disrespect for this principle is even the most serious fault both by the ECB and by the ECJ. The mistakes made in the attempt to neatly distinguish between monetary and economic policy can fully be gauged only if the related discussion about the purported disrespect for the principle of proportionality is taken into consideration.

E. The Principle of Proportionality

According to the BVerfG, ‘the principle of proportionality requires that the programme's monetary policy objective and the economic policy effects be identified, weighed, and balanced against one another. Where a programme's monetary policy objective is pursued unconditionally and its economic policy effects are ignored, it manifestly disregards the principle of proportionality enshrined in Article 5(1), second sentence and Article 5(4) of the Treaty on European Union’.Footnote ¹⁰⁸

For the BVerfG, disregard of the principle of proportionality may violate the principles of democracy and the sovereignty of the people and end up in a violation of the principle of conferral. According to the German Constitutional Court, this omission of ‘weighing and balancing’ is at the roots of the identified ultra vires acts.Footnote ¹⁰⁹

Much has been written about the ‘proportionality’ issue in the immediate aftermath of the publication of the PSPP judgment.Footnote ¹¹⁰ The PSPP judgment presents itself, at first sight, as an erudite piece on the principle of proportionality, written, however, in a lecturing tone.Footnote ¹¹¹ Based, primarily, on a ‘typically German’ reading of this principleFootnote ¹¹² and citing a long list of judgments hardly suitable to corroborate its position,Footnote ¹¹³ the BVerfG tries to sell its viewpoint as the general European one. For the BVerfG, the principle of proportionality has become an instrument of weighing and balancing that would allow for the attribution of measures to specific competences with mathematical precision. According to the BVerfG, this balancing is totally missing, both at the level of the ECB (where the ‘operative’ decisions are taken) and the ECJ (where these decisions should have been controlled).Footnote ¹¹⁴ And the outcome of the—allegedly superficial—assessment of these measures by those two institutions is qualified, respectively, as ‘not comprehensible from a methodological perspective’ (at the level of the ESCB) and ‘meaningless’ (at the level of the ECJ).Footnote ¹¹⁵

Strong criticism was voiced against these findings.Footnote ¹¹⁶ However, these critics partly exaggerated in the opposite direction, taking recourse to extreme formalism. Thus, it was said that the principle of proportionality as stated in Article 5 (1), second sentence and Article 5(4) TEU applies for the exercise of given competences and not for their delimitation. Furthermore, it was contended that the BVerfG does not apply this principle to the delimitation of competences between the State and the Federal Units in Germany.Footnote ¹¹⁷ It would therefore be incoherent for the BVerfG to apply this principle in the relations between the EU and its Member States. These arguments are not convincing. From its very logical structure, the proportionality principle operates not only ‘internally’ as to the exercise of a specific competence norm but also ‘externally’, as to the delimitation of the competence's outer borders. At least in extreme cases, it is therefore conceivable that disproportionate measures are no longer covered, partially or entirely, by a specific competence norm they allegedly are based on.Footnote ¹¹⁸

Neither is it convincing to state that the BVerfG was incoherent when it applied the competence order to the EU federal order while excluding it for the German (domestic) one. The two situations are hardly comparable. While within the European Union the distribution of competences between the Union and its Member States is in a continuous flux, with the ECJ acting as an arbiter with far-reaching powers, the situation within the Federal Republic of Germany is far more consolidated. While in the former case the principle of proportionality can provide useful guidance (in the use of EU competences), in the latter case to allow reference to proportionality considerations for the delimitation of competences could put into question a competence order that is broadly accepted and widely transparent.

In summary, it can therefore be said that it would be unfair to chide the BVerfG for having referred to the principle of proportionality for examining whether a violation of competence norms to the detriment of Member States had happened, even though the argumentation by this Court was in many senses not tenable and ‘stridently German’. The real problem was rather that the BVerfG tried to use the principle of proportionality (previously introduced by the ECJ in the Gauweiler judgment as a legal problem-solving instrument) to find a dividing line between monetary policy and economic policy where no such dividing line exists. The BVerfG aimed at devising legal clothes for economic instruments it thought to be separate and autonomous but which in reality are closely interconnected. It pursued this strategy with the utmost determination, thereby, however, only additionally evidencing the faultiness of this approach. As the economic literature has very well analysed, a series of questions for the BVerfG—probably well known to readers of German print media for the broader public—relating to the economic effects of the ECB's bond-buying programmes has remained unanswered. The problem is: if not even economists can give a satisfying answer to these—inherently economic—questions, how should lawyers?

The BVerfG expected the ECB to give an answer (under the control of the ECJ) on the effects of the bond-buying programme, ‘for example’ on ‘public debt, personal savings, pension and retirement schemes, real estate prices and the keeping afloat of economically unviable companies’.Footnote ¹¹⁹ And this was not enough. The German Constitutional Court expected furthermore that—in an overall assessment and appraisal—these effects should be weighed ‘against the monetary policy objective that the programme aims to achieve and is capable of achieving’.Footnote ¹²⁰

Thereby, however, the BVerfG was widely overestimating the material possibilities and potential of economic analysis. The BVerfG provided, as mentioned, only a few examples for effects that the ECB should have measured and juxtaposed to the official monetary effects. But what are the further effects of these measures and who should decide which ones are to be considered? Even assuming that such a selection can be made in an ‘objective’ way, how should these effects be weighed against each other? And complexities do not stop here as has been demonstrated in economic literature.Footnote ¹²¹ For example, what is the net effect of a bond buying programme that creates jobs but raises real estate prices (with positive effects for homeowners and negative effects for buyers) and eases access to credit for governments at the price of influencing the risk assessment?Footnote ¹²²

One can see immediately that every choice in this field is the expression of certain values and needs. We can hardly assume that these values and goals are all the same all over the Euro zone. The ones mentioned by the BVerfG rather sound again ‘typically German’. Should the ECB have carried through a weighing and balancing according to a German preference or what the BVerfG retains as such? It is obvious that this cannot be expected from the ECB.

In summary, the expectations the BVerfG seems to nurture in the proportionality principle are widely exaggerated if they are not a mere pretext to advance specific German interests (or interests considered to be as such).Footnote ¹²³