They are preparing for a big deal in the case of the Merkelék virus, for which the Hungarian government may be seriously concerned

Two explanatory statements and two important speeches.

On three fronts at the same time, very important things were said on Wednesday in EU affairs, which will eventually interconnect and also affect the economic policies of the Member States in the coming years, namely:

• Unusually, the two most influential members of the German Constitutional Court were forced to explain and defend last week’s far-reaching decision in parallel interviews in the German press: Andreas Vosskuhle, who retired as president of Die Zeit the day after the decision was announced, and Peter M. Huber, who also played a key role in drafting the decision, at the Frankfurter Allgemenine Zeitung and the Süddeutsche Zeitung, respectively. They explained that What was the real reason and purpose of “torpedoing” the ECB’s bond purchase program?and why they were given 3 months to demonstrate that the program was proportional to the objectives and therefore did not violate its own mandate.
• Chancellor Angela Merkel addressed the German Parliament And he said that, respecting the decision of the German court, we must act wisely to keep the euro alive (!), and at the same time, the coronavirus recovery fund must also be strong. For the latter, the German state must dig deep into his pocket, while regretting the need for political union (!) In his speech.
• After the weekend, the German court threatened the German government with infringement procedures for a decision. Ursula von der Leyen on Wednesday described the framework for a three-pillar recovery fund at the European Parliament (EP) in Brussels. The President of the European Commission is also under great pressure, as the EP has threatened to veto him if the institution is not sufficiently involved in drawing up and monitoring a sufficiently ambitious plan and if there is no new EU budget revenue. He also explicitly promised the last two in his speech. for MEPs, the President of the Commission.

Unprecedented Peak: What do these have to do with each other?

Vosskuhle, who has repeatedly “leveled” European integration with Constitutional Court decisions in recent decades, emphasized in the newspaper, among other things:

They are convinced that their decision is good for Europe because it strengthens the rule of law and will become increasingly clear in the medium and long term.

According to, the constitutional courts of the Member States can rarely, in exceptional cases, intervene (there have been many examples of this), when they see that the European processes violate the constitution of their own Member State. In the present case, they considered that the effects (of economic policy) of the ECB’s asset purchase program effectively violated the German Constitution, as it gave German institutions the exclusive right to shape economic policy.

Vosskuhle said anyway: after the German decision, the Polish Constitutional Court will do what it wants, but

however, they no longer have to be taken seriously because they are puppets.

Given this, the president of the Polish Constitutional Court was outraged and described the statement of his German counterpart as scandalous, stressing that his institution was really independent from the Polish government.

Peter M. Huber, perhaps more influential with the departure of Vosskuhle, said in two interviews: yes, there may be situations in which the constitutional court of a Member State can overturn a decision of the Court of Justice of the European Union, because its primacy cannot always be interpreted without restrictions. But of course they generally accept the primacy of the EU Court of Justice, they just want a better functioning of the EU Court of Justice. According to him, by the way, they received praise from the wrong places for his decision, referring to the cheers of the Polish Prime Minister, who said that the German court had made one of the most important decisions in the history of the EU.

Apparently the above three developments have nothing to do (close) with each other, but Merkel in the Bundestag also said on Wednesday about the recovery fund that:

The stronger the European response, the more secure the ECB will be in doing its job. Clearly there is a connection between the two.

This is how Merkel described her plans.

Monday Reuters leaked from the CDU leaders meeting that if the ECB gives any explanation for its program, Merkel sees the huge legal and political chaos caused by the German Constitutional Court as solvable (The decision also required that the German government and parliament hold the ECB accountable.) To do this, the government must also behave prudently and responsibly, respecting the court’s decision. He said it was understandable that the European Commission had threatened the Germans with a procedure because EU law was primary and that if the Bundesbank was prohibited from buying bonds, it would be prohibited from its Eurosystem obligation that the Commission could legally enter into contracts) . . However, according to the report, Merkel finds it problematic that the German decision has provoked positive reactions from some Member States (see the Poles).

On Tuesday The news agency had already leaked what Merkel had said at the CDU / CSU faction meeting: EU Member States must receive aid, because it is not good for anyone if only the German economy is strong, and that is why it has agreed (!) with the leader of the alliance of the political group that the German state will have to pay more to the EU programs and that the Bundestag will participate in the process of spending more money.

Wednesday In her Bundestag speech, Merkel was already talking about

The decision of the German Constitutional Court threatens the very existence of the euro, but it wants the euro to remain and even remain strong and to do so wisely, respecting the court’s decision.

In his words, after all. The German court ruling drives integration of European economic policy, which is needed more, not less, anyway, and Germany is ready for closer integration. He also said that it should not be taboo to amend the EU Treaty if we want to overcome the challenges.

Furthermore, even warned, we must never forget what Jacques Delors said before the introduction of the euro:

We also need political union, monetary union alone will not suffice.

Our materials on the subject in the last days:

This is the link

Therefore, by making it clear to Merkel that there is a link between the difficult problem facing the ECB and the basis for recovering from the coronavirus crisis, the following arises:

• Germany uses the coercion resulting from the court decision and the delicate situation surrounding the allocation of resources for the recovery fund to: seeks to move towards closer European integration the euro area or even the EU as a whole.
• It is probably not a coincidence that, after the German court ruling published on May 5, the European Commission did not publish its proposal on May 6 for the Recovery Fund and the EU budget for 2021-2027, but asked for time to develop it further. It is possible that in this work also deep down, the two old allies Merkel and von der Leyen agree.
• As the southern Member States, which are most economically affected by the viral crisis due to their weight in tourism (see below), are heavily indebted, The German government is also ready to provide EU financing solutions to distribute grants to the neediest of the recovery fund. This will not increase (as much) the debt ratio of people in difficulties, so the euro will not be compromised either., but as this solution indicates greater European solidarity, greater integration and closer coordination of economic policies.
• Tighter integration implies closer coordination of fiscal policies and if such a plan is finally put together (If they are larger, the “stingy” Member States in a better budgetary position are willing to pay more in joint EU programs so that more subsidies can be distributed through the joint issuance of European Commission bonds) , then it would remove the burden from the ECB. Therefore, the central bank would not have to buy government bonds from peripheral countries at such a rate to keep their yields low and, therefore, indirectly, help them finance their debt (which apparently disturbs the German Constitutional Court, for example).
• It is even conceivable that The ECB closes now criticized the PSPP asset purchase program in 3 months by the German Constitutional Court (If neither the ECB nor the Bundesbank respond to the German court, the Bundesbank will not be able to participate in the program anyway, which would lead to the collapse of the entire PSPP, and this could be avoided by stopping it.) In this case, only the ECB would keep the PEPP program launched the other day due to the coronavirus crisis, or launch some new program. Currently, the PSPP only represents approx. trimester.

The key to cutting the Gordian knot is really what Merkel said:

If we spend more vigorously through the EU recovery fund, we will not only alleviate the crisis in distressed Member States, but we will also remove the burden on the ECB, thus avoiding the risks of a German court ruling.

In short, after the loosening of monetary policy that has been exaggerated so far, Europe would be on the road to further easing of fiscal policy. The figure below shows how different the continent is for him in this: