The European Economic Constitution after the PSPP Judgment: Towards Integrative Liberalism?

Abstract This article argues that the PSPP judgment effectively buries the era of financial liberalism, which has dominated the European economic constitution for decades. It raises the curtain on a new political paradigm, which I call “integrative liberalism”. Whereas the financial crisis put financial liberalism under strain, the development since then has been contradictory, torn between state intervention and market liberalism, focused above all on buying time rather than finding a new constitutional equilibrium. Now, together with the measures adopted in response to COVID-19, the PSPP judgment paves the way for profound change. Integrative liberalism is characterized by an overall shift from the market to the state, mitigating the post-crisis insistence on austerity and conditionality. Contrary to the embedded liberalism of the post-war era, integrative liberalism operates in a corrective and reactive mode with a focus on goals and principles, lacking the emphasis on long-term planning. Like every political paradigm, integrative liberalism ushers in a new understanding of the law. It puts the emphasis on context instead of discipline, and it elevates the proportionality principle. If integrative liberalism is to succeed, however, the democratic legitimacy of the Eurosystem and its independence require serious reconsideration.

threatened by a decline into autocracy. 5 And it drowns any positive signal the First Senate's judgment on the Right to be forgotten may have sent. 6 Moreover, the PSPP judgment provides credence to the view that the multiple crises the European Union (EU) has confronted over the last decade precipitated a general erosion of the rule of law 7 -a position that enables the extreme right to posture as the true defenders of the rule of law in the attempt to gain credibility among more centrist conservatives worried about the course of the Union. Doctrinally, the PSPP judgment is based on a critique of the Court of Justice of the European Union's (CJEU) understanding of the proportionality principle, claiming it should serve as a yardstick not only for the conditions under which the EU may exercise its competences, but also for the establishment that the EU has such competence to begin with. 8 On all of these counts, the BVerfG's methodological approach suggests that it is struggling with pluralism on an epistemic level. 9 As if this were not enough, the judgment also casts a shadow over the EU measures adopted or envisaged in reaction to the COVID-19 crisis. 10 When taken together, it is easy to see why the PSPP judgment prompted so many to characterize it as the harbinger of a dystopian future for the EU.
While I agree with much of that critique, I believe that the future does not look entirely bleak if one singles out one particular aspect of the PSPP judgment. The PSPP judgment marks a seachange in the evolution of Europe's economic constitution. It even might represent the first signs of a new politico-economic and legal paradigm that replaces the limbo in which the European economic constitution has found itself since the dawn of the financial-turned-fiscal crisis. While the European economic constitution has often evolved incrementally, the judgment is one of those rare moments in which the evolution becomes palpable: The institution whose self-understanding cast it in the role of the strongest opponent of change has condoned and accelerated the opening of a new chapter in Europe's economic constitution. This claim derives from a single, apparently marginal paragraph of the PSPP judgment: The fact that the ESCB has no mandate for economic or social policy decisions, even when using monetary policy instruments, does not rule out taking into account, in the proportionality assessment pursuant to Art. 5(1) second sentence and Art. 5(4) TEU, the effects that a programme for the purchase of government bonds has on, for example, public debt, personal savings, pension and retirement schemes, real estate prices and the keeping afloat of economically unviable companies, and-in an overall assessment and appraisal-weighing these 5 Stanisław Biernat, How Far Is It from Warsaw to Luxembourg and Karlsruhe: The Impact of the PSPP Judgment on Poland, in this issue; Friedemann Kainer, Aus der nationalen Brille: Das PSPP-Urteil des BVerfG, 31 EUROPÄISCHE ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT [EUZW] 533, 536 (2020). effects against the monetary policy objective that the programme aims to achieve and is capable of achieving. 11 I argue that this paragraph in the PSPP judgment effectively buries the era of financial liberalism that has dominated the European economic constitution for decades and raises the curtain on a new political paradigm, which I call "integrative liberalism". The financial crisis put financial liberalism under strain, but the development since then has been contradictory. It has been torn between state intervention and market liberalism, focused above all on buying time, rather than finding a new, viable constitutional equilibrium. Now, together with the measures adopted in response to COVID-19, the PSPP judgment paves the way for profound change. Integrative liberalism is characterized by an overall shift from the market to the state, mitigating the post-crisis insistence on austerity and conditionality. Contrary to the embedded liberalism of the post-war era, however, integrative liberalism operates in a dynamic, pluralistic environment and in a corrective and reactive mode with a focus on goals and principles, lacking a strong idea of long-term planning.
The purpose of this article is to track the evolution of the European economic constitution and to locate the place and meaning of the PSPP judgment in it. Of course, courts have played a key role in the evolutionary process I chart, often by dismantling old and stabilizing new paradigms. Each paradigm shift in the economic constitution usually corresponds to a shift in the understanding of the function of the law. The article first sets out the idea of political and legal paradigms as a way of mapping the evolution of the economic constitution, and with it, of the modern welfare state. 12 It then goes on to track the evolution of the political and legal paradigms dominating the European economic constitution over four stages from post-war embedded liberalism and the corporatist paradigm of law, via financial liberalism and the governance paradigm of law, via post-crisis technocracy, to integrative liberalism. I demonstrate how the PSPP judgment buries earlier convictions about the disciplinary role of law and heralds a new, contextual legal paradigm that is centered on the proportionality principle. 13 If integrative liberalism is to succeed, however, the democratic legitimacy of the Eurosystem must be seriously reconsidered. One even might place the value and meaning of central bank independence in the European economic constitution on the table. 14 I conclude by cautioning against risks that might emanate from integrative liberalism. Historically, rising social inclusion came has come at the expense of the exclusion of marginalized groups, both at home and abroad. 15

B. Paradigms in the Economic Constitution
At the outset, a few notes are in order on the concept of paradigms. I use paradigms as a category for describing the evolution of the welfare state. This account follows Andreas Reckwitz, who, inspired by Thomas Kuhn's concept of scientific paradigms, 16 understands political paradigms to be discursive and governmental frameworks for the solution of societal problems in liberal democracies. 17 In other words, a paradigm designates a set of preconceived understandings about societal problems and patterns of social behavior and policy meant to solve those problems. According to Reckwitz, modernity has been characterized by the alternation of more dynamic, liberalizing paradigms and more restrictive, regulatory paradigms. Reckwitz does not restrict his concept of paradigm to the politico-economic sphere, but finds that a paradigm's cultural significance also is relevant.
Crucially, each paradigm exists in different varieties that reflect the entire political spectrum. One can approximately distinguish a conservative and an emancipatory variant of each paradigm. Paradigms thus reflect the shared background assumptions undergirding political discourse at a certain place and time. Only this allows a paradigm to be widely shared. The economic and cultural repercussions of a paradigm pose specific challenges for democratic legitimacy.
Paradigm shifts occur during periods of crisis whenever the dynamics of economic and cultural evolution exhaust the capacity of a paradigm to describe and solve relevant social problems. Such developments are not merely exogenous. In fact, they might result from unintended effects of the dominant paradigm, giving rise to paradoxical developments that undermine the paradigm's own descriptive and prescriptive capacity. Accordingly, Reckwitz reconstructs how the socialcorporatist paradigm of the post-war era created economic conditions (market saturation and a decline of industrial production) and cultural conditions (civil rights movement) which it no longer could control. Strained by those conditions, and after a period of crisis during the 1970s, the social-corporatist paradigm was replaced by the era of overt liberalism, the collapse of which presumably began presumably even before the onset of the great financial crisis. 18 As I mentioned earlier, my focus here is on the role of law, and specifically of courts, in the evolution of political paradigms. Political paradigms coincide, and are closely intertwined, with the evolution of corresponding legal paradigms. 19 Legal rules do not operate in a vacuum They are conditioned by, and condition, their context. As Habermas explained, we "interpret individual propositions not only in the context of the legal corpus as a whole but also within the horizon of a currently dominant preunderstanding of contemporary society. To this extent, the interpretation of law is also an answer to the perceived challenges of the present social situation." 20 The parameters defining a legal paradigm include the role of courts and institutions, the role of rights, methodological approaches oscillating between form and substance, and more generally, theories of the state and of individual freedom which inform the making and the application of the law. As with political paradigms, there are variations within any prevailing legal paradigm. In fact, these variations can compete with each other, as the dispute between originalism and the living constitution in U.S. constitutional discourse amply demonstrates. 21 In contrast to both public choice and Marx-inspired approaches to law and political economy, 22 I assume that legal paradigms have a dual function. On the one hand, they provide the structures whithin which political paradigm change manifests itself. On the other hand, they serve as agents driving change in the political paradigm. Law, in other words, enjoys a degree of relative autonomy as against economics and culture, chiefly because it has its own mechanisms of reproduction. 23 Still, its reproduction is coupled to varying degrees with other social fields. 24 This is why law loosely reflects the prevailing political paradigm.
The history of European integration is rich in examples of paradigm change facilitated by legal evolution. As the subsequent part of this article will show, law has played a key role in this process. The current shift towards "integrative liberalism" is no exception. Of course, Minerva's Owl only spreads her wings at dusk, and paradigms only fully reveal themselves in hindsight. The following 18 Id.  Kjaer, supra note 19, at 8. 22 Id., at 3. 23 See already MAX WEBER, ECONOMY AND SOCIETY 883, 890 (Guenther Roth & Claus Wittich eds. 1978). 24 Cf. Gunther Teubner, Substantive and Reflexive Elements in Modern Law, 17 LAW AND SOCIETY REVIEW 239, 249 (1983) (arguing that this is the common denominator of both Habermas's and Luhmann's theories of law); similarly supra note 19, at 12. conceptualization of integrative liberalism and its evolution, at this early stage of its emergence, must be somewhat speculative. But the effort is worth it. It will provide a useful foil for the comprehension and critique of European integration at this crucial juncture.

C. The Evolution of the Economic Constitution
The evolution of the European economic constitution begins in principle before 1957. The Concert of Europe and the balance of power it established provided not only a political, but also an economic framework, stabilized by the rules of international law and domestic constitutional law. 25 Nevertheless, the following overview will paint with admittedly broad brushes the evolution of the economic constitution of Europe since the Treaties of Rome. Much of the following has been said before. But it is necessary to chart the past paradigms of the economic constitution in order to understand the fundamental change introduced by the PSPP judgment.

I. Embedded Liberalism: The Corporatist Paradigm
The characterization of the economic constitution established by the Treaties of Rome is the subject of a well-worn controversy as it combined market-based and interventionist aspects. On the one hand, it enumerated the common market as a basic principle and imposed on member states the duty to liberalize their economies, 26 supplemented by competition rules, ordoliberalism's pet project. 27 Also, the absence of European welfare state regulation has been a core tenet of the EU constitutional balance. 28 On the other hand, this absence did not necessarily reflect an anti-social bias in the early economic constitution as it was expected that national welfare states would converge towards high overall standards. 29 Moreover, sectoral policies for agriculture and the montane industry foresaw an interventionist role for the Communities, including price controls. 30 For these reasons, the ordoliberal camp had some misgivings about the treaties of Rome. 31 It is this particular policy mix of the post-war arrangement that John Ruggie aptly described as embedded liberalism. 32 In this respect, the European Communities shared many traits with the international economic order, characterized by the Bretton Woods system of fixed exchange rates, capital controls, and frequent interventionist monetary policy to stimulate growth. This provided the backbone for cautious trade liberalization in the GATT framework, while enabling the development of the welfare state-though only in the industrialized countries. 33   liberalism was entrenched by legal structures reflecting a corporatist paradigm originating in the interwar period. 35 It differed markedly from the methodological individualism characterizing liberal-bourgeois law with its focus on property and sovereignty, which came to be seen as the cause of severe social disruptions that culminated in the First World War. By contrast, the corporatist paradigm put the emphasis on the intermediary structures of society and their potential for social cohesion. 36 These structures, including trade unions and religious denominations, were constitutionally entrenched in the emerging economic constitutions for the purpose of (re-)embedding the economy in society and mitigating the effects of societal differentiation. 37 The quasi-official character of such societal structures in interwar constitutions called into question the state-society distinction. It culminated in the emergence of cartels 38 -a development which provoked fierce opposition from liberals like Kelsen and Hayek, urging respect for legal formalism. 39 After the Second World War, the focus of the economic constitution shifted from associating intermediary structures with the state to the establishment of government institutions that would ensure the expansion of modern welfare states while at the same time protecting the state against intermediary structures, especially extremist groups, that were prone to undermine it. 40 Still, even the post-war variant of the corporatist paradigm did not assign particular significance to social rights. 41 Instead, it chiefly relied on government discretion, planning, and purpose-oriented rules. 42 The German Basic Law is paradigmatic in this regard. The extensive economic provisions of the Weimar constitution were replaced with an innate relationship between the principles of the social state and of democracy. 43 This made it the responsibility of the legislative and executive powers to ensure social equality.
The new corporatist paradigm also permeated international law, where the law of cooperation 44 replaced weak interwar structures with legally more powerful international organizations enjoying legal personality. 45 The European institutions shared these functionalist underpinnings, 46 and European law became instrumental to their program of integration by establishing itself as autonomous in the Van Gent en Loos and Costa ENEL judgments. 47  constitution had exhausted itself in establishing and entrenching European authority, while constraining both Member States and private actors. 48 The downside of the embedded liberalism and the corporatist paradigm was their lack of societal pluralism and deficient recognition of individual rights, especially economic, social, and cultural rights. The reduction of class differences came at the price of a cultural expectation of homogeneity and heteronormativity, which were to provide the necessary cohesion. 49 II. Financial Liberalism: The Governance Paradigm

The Constitutionalization of Governance
Embedded liberalism succumbed in the crises of the 1970s. Its economic model came to a breaking point as the consequence of industrial overproduction and a slowdown of growth, leading to rising sovereign debt and an ever-increasing current account deficit of the United States. This ultimately caused the decline of the Bretton Woods System. Contrary to contemporary expectations, 50 the new political paradigm emerging victorious from the crisis tilted the stakes decidedly in favor of liberalization and shifted hopes from the state to the market. The demise of Bretton Woods ushered in free-floating exchange rates and the liberalization of capital transfers, and the reorientation of the Bretton Woods institutions helped spread ideas of market liberalization and institutional reform. 51 Together with technical innovation, especially in the fields of data processing, communication, and transport, these conditions provided the background for an unprecedented degree of market liberalization and financial, economic, political, and social globalization, 52 particularly after the end of the Cold War removed the disciplining impact of the ideological confrontation that had dominated the northern hemisphere throughout the previous 70 years. 53 It would be misleading to call the new order the "neoliberal paradigm." Neoliberalism has always been more of a theory existing in many different variations. 54 The political reality in some respects had deplorably little to do with neoliberal theory, as the endemic practice of tax evasion and persistent protectionism (e.g. in the agricultural sector) demonstrate. The same applies to ordoliberalism, its state-revering German cousin. 55 I believe that "financial liberalism" better describes the political paradigm that emerged in the (late) 1970s. A striking feature of this paradigm is the enormous growth of the financial sector relative to the real economy. 56 The financial sector also gained considerable political influence: As sovereign debt rose continuously due to the shift to inflation targeting, 57 developed economies increasingly needed to assure their creditors of their repayment capacity. This created pressure to reduce public expenditure, leading to waves of privatization and austerity. Like any other paradigm, financial liberalism came in different varieties. One can broadly distinguish a conservative variety and an emancipatory one. The former variety relied on a socially conservative agenda based on individual morality and frugality; 59 a strategy which was endorsed by some of the main proponents of the new paradigm including Reagan, Thatcher, and Kohl, and by reformers in Central and Eastern Europe like Wałęsa. The latter variety integrated the demands of the civil rights movement into its agenda and pressed for advances in civil and political rights, yet not necessarily social rights. 60 The civil rights movement and financial liberalism overlapped in respect of their shared methodological individualism and the focus on individual rights. 61 Again, law played a crucial role in bringing about and stabilizing the new order, but this time on the basis of a markedly different understanding about the role of law in society. This understanding shifted towards the "governance paradigm" of law. 62 This paradigm has two sides. The first side is the disciplinary one, championing binding rules, adjudication, and law enforcement to restrict political discretion. The second side is the governmentality side, resorting to private and informal modes of organization for efficient goal attainment without the strictures of the law.
As concerns the disciplinary side, European law and international law developed in parallel in many respects. International law saw the rise of rules-based governance by the proliferation of international courts and tribunals in the fields of trade and investment, and, catering to the emancipatory trends within the prevalent political paradigm, in human rights law and international criminal law. These processes culminated in the constitutionalization of international law, understood here as a discourse on the emergence of human rights, democracy, and the rule of law as international constitutional principles. 63 One view even considers the disciplinary rules of international economic law to have constitutional character. 64 In European law, the increase in disciplinary potential to some extent came as a result of improvements in political decision-making. The extensive interpretation of the Communities' competences 65 and the introduction of qualified majority voting with the 1986 Single European Act allowed for an increase in secondary law-making. To an important extent, however, "integration through law" meant integration through courts. 66 The CJEU effectively constitutionalized an idea of market freedom 67 through a series of cases running from Dassonville 68 and Cassis 69 to Inspire Art, 70 Viking, and Laval. 71 The point of this case law was to discipline the member states and align their policies with market freedoms. The BVerfG, by contrast, used a disciplinary approach to the law to define limits for European institutions as well as for European integration as a whole. To protect citizens' economic rights and interest, the BVerfG forced the CJEU into recognizing fundamental rights as general principles of community law. 72 The CJEU gave an evasive response. It accepted fundamental rights in principle, but it consistently defended the European institutions and the remnants of their post-war embedded liberalism by holding that these rights had not been violated. 73 This changed only when the CJEU turned the tables in fundamental rights adjudication and recognized their potential for curbing member states' power when implementing European law. 74 Doctrinal alignment between fundamental rights and fundamental freedoms in European law effectively reduced the opportunity of the Member States to invoke (domestic) fundamental rights guarantees against EU law because this development put both concerns on par and constitutionalized economic freedoms. 75 In fact, the emergence of European value constitutionalism epitomizes the disciplinary side of the governance paradigm. 76 It represents a shift in thinking about the European constitution from a formal constitution governing a supranational institution 77 to a substantive constitution comprising fundamental principles for the exercise of public authority at the level of the member states, and at the European level. 78 Again, the impulse for the idea of a substantive constitution for Europe came from the BVerfG, this time in the form of the Maastricht decision, which was an attempt to curb the power of the emerging EU. 79 It should be added that the CJEU has meanwhile availed itself of constitutional thinking in order to restrain recalcitrant member states. 80 On the governmentality side of the governance paradigm, the use of private modes of coordination, soft regulation and "governance by information" has made it possible to isolate law-making, to some extent, from parliamentary processes. 81 At times, however, soft mechanisms of coordination have been a means to avoid hard rules that influential constituencies considered to be overly burdensome. This applies particularly to guidelines on corporate social responsibility. The spread of governmentality at the international level was unprecedented. 82 This trend also gained some ground in the EU, as the emergence of the Open Method of Coordination testifies. 83   The bifurcation of the governance paradigm might look odd and somewhat contradictory. It reflects a variegated pedigree. It was informed, among others, by neoliberal concepts of supposedly apolitical governance by rule, 84 and the managerialism characteristic of the law and economics movement. 85 Other impulses came from emancipatory reconstructions of liberalism. 86 Whether the alliance was always harmonious may be debated. For example, law and economics largely lacks the profound epistemological scepticism of neoliberal writers. 87 More importantly, the disciplinary side showed little interest in social rights. It was biased against the welfare state. The entrenchment of economic liberalism left downward adjustment of social standards as the only possible option. 88 The Lisbon treaty provided little relief as it only shifted the aim of the Union from "open market economy" to "social market economy." 89 That, however, could only have worked by connecting social concerns with the principle of democracy. But the Lisbon treaty failed to expand the powers of the Union and the scope of application of ordinary legislative procedure in the crucial field of economic and monetary policy. 90

The Constitutionalization of Money
It is important to understand that the Maastricht Treaty establishing the EMU created and constitutionalized a profoundly new economic, institutional, and legal arrangement that is genuine to financial liberalism. It would be misleading to consider the EMU and the ECB as an independent, inflation-targeting central bank to simply have adopted German ordoliberal thought from the 1950s. 91 Of course, there is no point in denying the preference of ordoliberalism for price stability. Writing even before Milton Friedman, Walter Eucken argued that fair competition required price stability. Price developments should reflect the unfettered results of market dynamics, rather than of political interference. 92 In reality, however, the monetary policy strategy of the Bundesbank and its institutional self-understanding varied over time as a result of its interaction with the mix of liberal and interventionist policies characterizing Germany's general economic policy. 93  the economic neutrality of the Basic Law is beyond dispute. Any liberal bias within the German economic constitution resulted from processes of internationalization and Europeanization. 94 The independence of the Bundesbank (and its antecedents the Bank deutscher Länder) had nothing to do with price stability. Instead, it resulted from the insistence of the allied powers, especially of the American occupying power, on restricting the authority of the federal government. 95 But independence never became a constitutional requirement before the Treaty of Maastricht came into sight. 96 Moreover, the Bundesbank and the Bank deutscher Länder were not committed to price stability to the same degree at all times. The first presidents, Vocke and Blessing, put its policy on a monetarist track in order to instil trust in the new currency. They even weathered a confrontation with the federal government in the mid-1960s. 97 The Stability Law of 1967 defined price stability as only one of several targets of economic policy. This created some debate about the relevance of these objectives for the Bundesbank. In any event, President Klasen, the successor of Blessing, struck a much more accommodating note in his public communication in the early 1970s. 98 Price stability as a legal requirement, not to mention a constitutional one, was off the table; various attempts to stretch the law in this direction failed. 99 Only the monetary turmoil of the 1970s brought Klasen and his successor Emminger to shift to inflation targeting. 100 Even then they pursued that path for political rather than economic reasons. Their Weimar experience suggested that they would have to keep inflation low to save democracy as rampant inflation rates would ultimately destabilize the government. 101 To sell the sacrifices of inflation targeting to the public and to avoid government intervention in credit growth, the Bundesbank created the myth that independence was indispensable for successful monetary policy, contrary to Friedman's writings 102 and even before the notion was theorized in scholarship. 103 This created a powerful narrative. It narrative allowed the Bundesbank to focus on price stability regardless of the consequences, even to impose excruciatingly high interest rates in the 1990s that brought the European Monetary System to collapse and Germany into recession. Under this approach, the paths of the central bank had to be lined with socio-political blood, sweat and tears. Yet, at no point did price stability become a constitutional requirement.
The success of the Bundesbank in stabilizing the Deutsche Mark fuelled the worldwide trend towards rules-based, inflation targeting, independent central banks in the late 1970s and 1980s. 104 When it came to establishing the EMU, Germany had an interest in maintaining this arrangement to preserve its social model based on an export-oriented economy. 105  It was for this reason that price stability became a legal requirement. The treaty would deploy the restrictive, disciplinary character of EU law against discretionary decision-making at the European level.
Chancellor Kohl was aware of the potentially destabilizing effects of a currency union. He had advocated a political union for years. However, sovereignty concerns by France and the United Kingdom prevented the materialization of such ideas. 107 Instead, to compensate for the lack of effective executive and legislative powers at the European level, the Stability and Growth Pact (SGP) chiefly relied on techniques of governmentality to enable soft coordination, and, most importantly to instil market discipline by establishing rather arbitrary criteria for debt and deficits that would send signals to financial markets. 108 To back up the credibility of the SGP, the treaties further restricted the power of the European institutions to provide financial assistance or resort to monetary means for financing governments. 109 In the end, the EMU came to feature a unique combination of discipline and governmentality. It established legal discipline for the European institutions, and market discipline for the Member States. The social fault lines of that arrangement have been known since the outset. 110 But the governance paradigm made them worse by enabling the selective constitutionalization of the disciplinary parts.
By constitutionalization, I mean the process by which the BVerfG aligned the disciplinary elements of EMU with the emerging value constitutionalism and made it sacrosanct like few other treaty rules. In the Maastricht judgment, the BVerfG gave price stability and central bank independence a constitutional significance that they had never had before under the Basic Law. What used to be based on economic reason and political choice, now became a matter of democracy backed up by the eternity clause of the Basic Law and the BVerfG's exercise of integration control. 111 Ironically, looking at the controversies afflicting the Bundesbank in the 1960s and 1970s, one may have argued that democracy required the exact opposite of an independent central bank. The BVerfG intensified this selective approach to constitutionalization in the Lisbon judgment by focussing exclusively on restricting the transfer of competences to the European level to safeguard the identity of the Basic Law. 112 It turned a blind eye on the fact that further transfers of powers might have safeguarded the social state, a constitutional principle that also enjoys the protection of the Basic Law's eternity clause, against the distributive effects of monetary policy. 113

III. Post-Crisis Technocracy
The crisis rescue measures adopted since about 2010 profoundly shook up the European economic constitution. The economic constitution during the past decade became a heterogeneous, essentially contradictory mix of features that both mitigated and exacerbated the fault lines of financial liberalism. The contradictions resulted not least from shifts among the two strands of the governance paradigm. 114 On the one hand, the European institutions adopted measures that set aside the disciplinary constraints established for them in the original EMU framework. They adopted a series of highly discretionary, intrusive governmentality techniques. This includes the European Stability Mechanism (ESM) to bail out Member States in financial trouble, the reforms to the Stability and Growth Pact, especially the introduction of the European Semester to control fiscal policy at Member State level more effectively, 115 the Banking Union, and an array of controversial monetary policies ranging from the 2010 Securities Markets Program to Quantitative Easing. 116 On the other hand, in a reverse development, the disciplinary framework applicable to the Member States toughened. For lack of other power resources, 117 the European level committed itself to imposing strict conditionalities on program countries and adopted the Fiscal Compact, which made constitutional deficit breaks obligatory. 118 These shifts towards technocratic governance created much-debated legitimacy problems. 119 The treaty framework no longer narrowly restricted the power of the Institutions. Ratcheting up governmentality techniques strengthened the position of independent and executive institutions, namely the ECB and the Commission, 120 while the power of the purse and the creation of new structures in parallel to the treaties assigned a powerful role to the Council and other intergovernmental constellations like the Eurogroup. 121 Judicial review could hardly compensate for these power gains. 122 Together with the new wave of discipline exercised over the Member States, especially the peripheral ones, some classified the post-crisis constellation as an example of authoritarian liberalism. 123 The predicate "liberalism" alludes to the heavy impact of the 114 In my eyes, it is therefore misleading to qualify the reforms as ordoliberal. This has been the subject of some discussion. European institutions on welfare issues, obliterating the erstwhile balance between European economic integration and domestic welfare. 124 As at earlier turning points, courts were instrumental in bringing about this change. 125 It has been argued that the CJEU's path dependence left it unprepared for the post-crisis constellation and the stricter control of the European institutions that constellation required. 126 While this does not appear implausible, one should not overlook that the approach of the BVerfG constrained the ability of the CJEU to alleviate the plight of citizens suffering from austerity. The Pringle 127 and Gauweiler 128 decisions need to be read against cases brought before the BVerfG raising challenges against the ESM treaty and the ECB's Outright Monetary Transactions program, 129 even though the preliminary reference in Pringle came from the Irish Supreme Court. In both cases, the BVerfG was less concerned about the power increase at the European level than it was about preventing fundamental changes to the model of the EMU and its core components, price stability and fiscal discipline, which it had constitutionalized through its Maastricht and Lisbon judgments. Had the BVerfG's chief concern been to curb increases in European authority, it would have refrained from requesting and accepting the constitutionalization of conditionality and austerity in the ESM and OMT cases-two governmentality mechanisms that could in theory hit Germany like any other member state.
The CJEU in Pringle and Gauweiler reacted by shifting the scope of the disciplinary framework from the European institutions to the Member States. On the basis of purposive treaty interpretations, it replaced the constraints imposed on the Union by articles 123, 125, and 127 TFEU with the constraints of Member State action deriving from conditionality. 130 Consequently, the BVerfG accepted both judgments as they left the essential elements of the EMU framework untouched. Bailouts and unorthodox monetary policy would come at the price of unpopular financial hardship to instil fiscal discipline. From this perspective it is no wonder that the CJEU left the issue of fundamental rights untouched in both cases, choosing to introduce them only later in the Ledra and Mallis cases, though in very different contexts because those suits were lodged by investors in sovereign debt. 131 It seemed that anything that would distract from the disciplinary constraints on Member States had to be avoided.
The BVerfG was content. The monetary model of financial liberalism involving social hardship to achieve price stability would continue; moral hazard was averted. Defending domestic democratic self-determination apparently did not require curbing European executive and intergovernmental powers. Hence, the European economic constitution was entrapped in technocracy and missed the chance for constitutional reform. 132 It is therefore hardly surprising that subsequent reforms that sought to increase the fiscal capacity of the Union or to "unionize" the ESM failed 133 and that the social rights pillar had a difficult time gaining traction.
IV. Towards Integrative Liberalism and a Contextual Paradigm? 1. Integrative Liberalism in Times of  It took another crisis for the post-crisis arrangement to change. The urgency of addressing COVID-19 led to a profound reconsideration of the technocratic constellation in the European economic constitution. While it is still early for any definite claims, it seems that a number of developments will call into question the disciplinary character of the post-crisis European economic constitution. The ECB was quick to set up a 750bn Pandemic Emergency Purchase Program (PEPP) providing additional quantitative easing at relatively flexible conditions in respect of both the qualifying collateral, and the allocation of purchases. 134 Like the existing programs for quantitative easing, it has not been tied to any conditionality, which immediately brought up the question of its legality. 135 In this respect, several additional developments are crucial. First, the European council quickly suspended the application of the stability criteria in the SGP on the basis of the general exception clause. 136 Second, the Eurogroup finance ministers decided in April 2020 to establish a rescue package, which gave the ESM only a minor role to play. 137 Instead, substantial amounts are to be disbursed in the form of grants, be it the SURE program 138 for employment support established on the basis of Article 122 TFEU, or the comprehensive package known as Next Generation EU with the Recovery and Resilience Facility (RRF) at its heart. 139 True, the Commission's proposal to disburse the majority of the originally planned 750bn as grants faced stiff opposition at the European Council meeting in July 2020, and the ultimate package became trimmed down in several respects. But the tides have changed decisively. The combination of loans-cum-conditionality no longer represents the default option. 140 As applications for the RRF will be integrated into the European Semester, the recovery plan strengthens the technocratic side of the EMU. But overall, it reduces its disciplinary, sanctioning potential. Using the European Semester as a bureaucratic vehicle normalizes financial assistance from EU level and diminishes the potentially disruptive effect of extended bargaining over individual country's applications for larger rescue packages. Third, the financing of the rescue package might have long-term consequences for the architecture of the economic constitution. The Commission intends to finance the RRF by borrowing on the financial markets via a special vehicle based on Article 122 TFEU, constructing a creative way around the prohibition to issue debt at the European level. This might make the RRF look like an on-off measure, despite its long-term refinancing plan. But to finance debt payments, the EU intends to adopt new, genuinely European taxes. It is certainly still a long way for this proposal to materialize, if ever. In case it does, however, it would fundamentally alter the balance in the European economic constitution. The fiscal capacity of the Union would increase independent of Member State contributions. That would deprive financially powerful Member States of some of their capacity to insist on pet-agendas, such as conditionality and austerity.
With some caution, it is therefore suggested that recent developments might give rise to an "integrative paradigm." The new political paradigm seems to be characterized by a general shift towards greater reliance on the state and on supranational institutions for economic governance. It does not, however, amount to a return to mid-century embedded liberalism. There is not a revival of classical mechanisms of planning and intervention. They cannot be reproduced in a global economy characterized by service, knowledge, and global competition rather than industrial production. Rather, economic planning exhausts itself in providing funding to public institutions and competitive economic actors. Such funding is to a considerable extent provided in the form of safety nets. Integrative liberalism has a predominantly reactive character, promising protection against major risks. It is a bit like a welfare state for states, a European safety net for major European events. Like the latter, the integrative paradigm also includes more forward-looking elements to confront potentially aggravating crises such as digital transformation and climate degradation.

The PSPP Judgment
One can read the PSPP judgment as the harbinger of a new legal paradigm corresponding to integrative liberalism. It allows a glimpse of the possible role of law in the future economic constitution. Again, it is the courts spearheading the transformation.
By and large, in Weiss the CJEU followed the test established in the Gauweiler judgment. In an essentially purposive reading of the treaty, it accepted the Eurosystem's unorthodox policy without any disciplinary strings attached. It allowed large quantities of sovereign debt purchases to pass with comparatively little assurance from the debtors. 141 Given the disciplinary character of the economic constitution after Maastricht and its entrenchment during post-crisis technocracy, one could expect that those clinging to the Maastricht compromise on the EMU, including the plaintiffs in the case at hand, would consider the approach taken by the CJEU in Weiss as ultra vires.
The big surprise in the PSPP judgment is that the BVerfG only prima facie gives the plaintiffs their way. In principle, though grudgingly, it accepts the CJEU's shift towards austerity-free monetary expansion. As the following contextualization of the PSPP judgment shows, the significance of this shift is enormous. It almost dwarfs the differences with the CJEU concerning ultra vires review. The BVerfG replaces the disciplinary function of the economic constitution with the flexibility and context-sensitivity of the proportionality test, representing a shift from discipline to welfare.
In its 2014 request for a preliminary ruling in the OMT case the BVerfG did not mention proportionality at all. Rather, it understood the distinction between monetary and economic policy to be rigid and inflexible, going as far as to claim that the OMT program "objectively" fell outside the scope of monetary policy. 142  The BVerfG accepted in the OMT judgment of 2016 that proportionality had a role to play, as the CJEU had ruled in Gauweiler. 143 However, it created a new cliff-edge by holding that proportionality concerned the existence of a competence, rather than its exercise. 144 The lack of proportionality could therefore render a measure ultra vires regardless of the CJEU's understanding of proportionality and the wording of article 5 TEU. 145 At the same time, the BVerfG strengthened the disciplinary character of the legal framework by emphasizing the need for strict, substantive legal review. 146 In its referral in the Weiss case, the BVerfG did not even put much weight on the proportionality principle, but relied on its old cliff-edge, the objective of the PSPP program. In its view, the economic effects intrinsic to the PSPP program would reveal its non-monetary character, irrespective of the proportionality question. 147 In fact, in the referral, the BVerfG examines proportionality only in one paragraph and only after it established that the effects of PSPP would undermine its monetary policy character. 148 This proportionality test appears redundant as the BVerfG reached the conclusion before that point that the program pursued undue economic policy objectives. In any event, the BVerfG again presented the dividing line between monetary and economic policy as a hard border, related to proportionality only in the sense that measures to be qualified as economic policy would at the same time constitute disproportionate monetary policy measures. 149 The BVerfG's view of the economic constitution continued being governed by the idea of discipline, imposing definite barriers.
In 2019, the BVerfG had another opportunity to confirm the disciplinary character of the EMU in the Banking Union case. 150 In this judgment, the BVerfG missed an ultra vires finding by only a few inches, and only because the BVerfG turned the judgment of the General Court in L-Bank on its head. The General Court had ruled that the Regulation establishing the Single Supervisory Mechanism (SSM) 151 put all Eurozone banks under the supervision of the SSM, which could then delegate back the supervision of non-systemic institutions to National Competent Authorities. 152 For the BVerfG this finding was incompatible with article 127(6) TFEU, the legal basis of the SSM Regulation. It therefore established that the Member States had retained the competence to supervise non-systemic institutions, while the SSM was entitled to expand its competence (Selbsteintrittsrecht) 153 according to mutually agreed criteria. 154 This stance, like the related (rather hopeless) German insistence on insulation walls between supervisory and monetary prongs, 155 reflects the legal paradigm of the Maastricht and Lisbon judgments. The economic constitution should discipline discretionary European institutions and prevent them from establishing a European welfare state. A holistic, discretionary approach to banking supervision that comprises all banks and takes all policy instruments into account would have considerable impact on welfare and was therefore to be reprimanded.
In the PSPP judgment the much-entrenched, rigid border between monetary and economic affairs suddenly disappears. The BVerfG shifts the focus of the dispute from the objective of the measure to its proportionality, arguing that proportionality should refer to the relation between the means and the effects instead of the means and the objective of a measure. 156 This turn nothing but transforms the delimitation between monetary and economic policy from a cliff-edge into a context-sensitive balancing exercise. The need to consider the social impact of monetary policy in the context of the proportionality test relativizes the notion of price stability. The test applied in the Weiss referral with respect to the objectives of the measure had in principle only one variable: The monetary policy objective provided the constant, while the non-monetary side-effects of the measure were the variable that would undermine the objective as of a certain point. A proportionality test, by contrast, has two variables or more, as monetary policy may cause a myriad of effects. Rather than enforcing price stability regardless of its adverse social effects, which had always been the hallmark of the disciplinary approach to monetary policy, price stability becomes subject to the careful examination of the economic, social, and perhaps also political costs and benefits of a measure. The PSPP judgment not only allows, but actually demands a more holistic, integrative approach to monetary policy. The BVerfG accepts that the delimitation between economic and monetary policy is situational and highly context-dependent, making it a suitable candidate for the proportionality principle.
This shift directly contravenes the intentions of the plaintiffs. 157 The existence of para. 139 of the PSPP judgment, the passage quoted in the introduction to this article, and its reiteration in the headnotes of the judgment, indicates that the Second Senate was fully aware of the potential implications. I would go so far as to speculate that the ultra virus finding may have been the price to be paid by some of the judges for the shift from discipline to context-sensitivity in the regulatory approach to monetary policy. The BVerfG stands its ground in respect of judicial dialogue, but cedes in matters of political economy, offering the ECB time and the opportunity to "improve" its proportionality analysis to meet the standards of the BVerfG. After all, the shift to proportionality ties in with the logic behind the dissenting opinion of Judge König in the Treaty Override case. Being one of the Europe-friendly members of the Second Senate, she proposed using a balancing test when parliament overrules an international treaty. 158 One might wonder whether the new constellation will give rise to a new legal paradigm. The judgment combines contextualism with judicial control. It uses the proportionality principle as a structural coupling between the economic constitution and the specific economic and social context. I propose calling this understanding of the function of the law the contextual paradigm.

D. The Eurosystem, Democracy, and Independence
Looking at the PSPP judgment, integrative liberalism and the contextual paradigm in the economic constitution carry the technocratic burden of the post-crisis constellation into the COVID-19 era. The distributive effects of integrative liberalism so far do not find an adequate embedding in democratic decision-making. This applies both to the ECB measures and the Recovery Fund. 159 This is problematic because the reactive nature of integrative liberalism requires continuous democratic reflection on necessary adjustments to economic governance. At the same time, the state of democracy seems in decline in some Member States, and the consequences do not spare central banking. 160 How can the Eurosystem's democratic legitimacy be ensured in the new context? Proportionality assessments are effective as governments and courts use them in specific institutional settings that provide constraints, 161 such as European constitutional pluralism and the related judicial dialogue. Nevertheless, in light of the distributive impact of monetary policy decisions, mere legal accountability appears inappropriate. Weak forms of democratic accountability, such as parliamentary or public scrutiny, seem preferable. 162 But it is doubtful whether they will suffice. 163 It should therefore no longer count as heresy to scrutinize the significance of central bank independence under integrative liberalism. If monetary policy makers need to deeply immerse themselves into socio-economic policy questions, one may wonder whether they should still be shielded from democratic legitimacy. Three options come to mind in this regard.
First, monetary policy could be handed over to a politically more legitimate body such as the Commission, or one could give the Commission the right to override the decisions of the Eurosystem. 164 As things stand the time inconsistency problem no longer applies in the same way. The risk of inflation seems to remain consistently low as a result of major economic and demographic transformations. There is no risk of a return of the 1970s for the time being. The potential to abuse monetary policy for government funding persists, though, at least in theory. Temporarily selective purchases of a troubled Member State's debt may help to bring spreads down. Following the OMT judgment, such purchases are justified if accompanied by conditionality. That conditionality may now have to be revisited in light of the more integrative approach to the economic constitution. It stands to reason to consider the budgetary surveillance carried out in the frame of the modified SGP as sufficient.
One might, however, argue that charging the Commission with monetary policy would lead to a concentration of power that should be avoided. As a second option, the Eurosystem could be treated as a second pillar of the executive power, fully democratic, yet independent from the Commission and the Council. Under this model the members of the Executive Board and national central bank governors would have to be democratically elected, by Parliament or even by direct election, on the basis of an economic and social policy programme. 165 This model would redefine the separation of powers for the 21st century. It is unclear how much leeway this model would leave for judicial intervention from Karlsruhe.
Third, one could leave the institutional arrangement as is and revisit the meaning of independence. The present meaning emerged only in the run-up of the Maastricht Treaty, and it owes a lot to the specific context of the time. 166 One could shift the perception of independence into the 159 direction of autonomy in the sense that it was used by the Bundesbank in the early 1970s. Accordingly, the central bank would align its policy with economic policy more generally. The Eurosystem is already required to do so, but only to the extent that it does not affect price stability. 167 The contextual approach to the economic constitution calls into question the mere possibility of understanding and defining price stability in isolation of the Union's economic policy goals. Price stability would become the Eurosystem's priority, but the barrier between price stability and other economic objectives would become fluid. That in itself would only be the first step. The Eurosystem would then have to align its monetary policy with the Council recommendations on the economic policy of the euro area. 168 The practice of these recommendations could be changed; they could provide more specific guidance for the Eurosystem concerning economic policy issues. Ultimately, the European Parliament would have to play a much stronger role in EMU generally and also with respect to these recommendations.

E. The Perils of Integrative Liberalism
The above exposition of integrative liberalism as a new political paradigm is still tentative. The evolutionary character of many of the described developments cautions against drawing definitive conclusions at this point in time. It is by no means clear that the bull carrying Europa is off the ice. Major risks of economic and social disintegration remain, including the crises of the rule of law and of migration. 169 Nevertheless, the transformation that the PSPP judgment reveals has been prepared over years. It results from profound shifts in attitudes, ongoing not only since the outbreak of the COVID-19 crisis. Moreover, one should not underestimate the significance of a global confrontation between the United States and China that threatens to squeeze Europe in between. It would not be the first time for external pressure to stabilize the economic constitution.
Should integrative liberalism therefore emerge as the paradigm governing the European economic constitution, then the challenges would be considerable. The democratic deficit of the current economic constitution is by no means restricted to the ECB. Moreover, there is a risk that a more welfarist, supportive European Union would seal itself off from the rest of the world. While Europe might have little interest in raising tariffs, it might restrict the movement of persons even further. Integration comes at the expense of exclusion. 170 One can only hope that the rule of law, and specifically of the proportionality principle, will govern migration and border control issues just as much as monetary policy. 167