EU on the brink: Germany’s ‘political bomb’ court case could destroy Brussels, warns Soros

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Hungarian-American Mr Soros, whose Open Societies Foundation supports liberal causes throughout the world, issued his warning after the Constitutional Court, in Karlsruhe, gave the ECB three months to justify bond buys under its flagship stimulus programme to mitigate to continent-wide impact of the coronavirus pandemic or lose the Bundesbank as a participant. Speaking to German daily newspaper the Augsburger Allgemeine Zeitung, Mr Soros, 89, said: “I’m just saying that this often makes crisis management more complicated.

This ruling is a political bomb that could tear the whole EU apart

George Soros

“Take the recent ruling by the Federal Constitutional Court on the lawfulness of the purchase of government bonds by the European Central Bank (ECB): this ruling is a political bomb that could tear the whole EU apart – at least as a Union that takes the law seriously.

“Because the judgment did not come from any court, but from the Federal Constitutional Court, the most respected institution in Germany.

“We are experiencing an open conflict between the Federal Constitutional Court and the European Court of Justice: Who is in charge?”

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With reference to the impact of coronavirus, he added: “I am very concerned about whether the European Union can survive this crisis.

“Because it is still an unfinished union, there is no real political and economic unity.

“That’s why Europe is now so much more vulnerable than the United States.”

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Hinting at the layers of bureaucracy which characterise the bloc, he added: “The Europeans also rely on the rule of law.

“And the mills of the judiciary are grinding very slowly, while a virus like corona is operating at lightning speed.”

Looking further ahead, Mr Soros suggested if the German court could openly challenge the authority of the European Court of Justice (ECJ), other countries would do likewise.

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He explained: “Of course Poland seized the opportunity straight away and made it clear that its government-controlled courts have the say, not Europe.

“In Hungary, Victor Orban used the corona crisis to appoint himself as a kind of dictator – and he issues decrees that clearly violate European law.

“If this decision of the Federal Constitutional Court prevents the EU from reacting appropriately to something like this, there will soon be nothing left of the idea of a democratic and constitutional Europe.”

Mr Soros said there were also question marks over the ECB’s policy, which would involve purchasing private and public sector securities to the tune of £657billion (750 billion euros), which plaintiffs to to the court including former MEP Hans-Olaf Henkel have argue would represent direct financing of governments.

He added: “The German judges gave the ECB three months to justify their current policies.

“This is feasible, but it will distract the central bank very much.

“In the middle of a historic crisis in which the ECB is the only European institution that really works – and can raise funds for a European rescue fund.”

Speaking earlier this week, Barney Reynolds, a leading UK and international financial services lawyer and a partner at Shearman and Sterling LLP, told “Germany is essentially saying it has delegated certain powers to the EU, but that it controls how the EU operates within those powers – so as to ensure the EU doesn’t overreach.

“Meanwhile, the ECJ asserts that it, alone, is the arbiter of whether the EU is operating within its powers and that the German constitutional court can play no role in the issue.”

“The fact is that the German constitutional court is in ultimate charge of that issue for Germany.

“In practical terms the member state courts are ultimately able to trump the EU court because they are the ones with the ability to bind their national entities – such as the Bundesbank, in this instance, which is being told not to cooperate with the ECB unless the ECB behaves in a manner satisfactory to the German constitutional court.”

(Additional reporting by Monika Pallenberg)

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