As German Court examines EU plan to issue debt, CDU & CSU argue about chancellor candidate

Last July, in a five-day marathon meeting of the European Council, the leaders of the 27 member states of the European Union agreed, with some modifications, to an economic recovery plan  prepared at their request by the European Commission. The plan, to be administered by the Commission through the EU’s Multiannual Fiscal Framework, its seven-year budget, features a €750 billion recovery fund, consisting of €390 billion in grants and €360 billion in loans that will be made available to the member states to assist their recovery from the economic consequences of the Covid pandemic. The fund will be financed by the EU borrowing in the capital markets. According to the plan, the €750 billion will be borrowed and allocated to the member states in 2021-2024 and repaid over 30 years beginning in 2028.

In September, the European Parliament approved an Opinion supporting a new Own Resources Decision (ORD) by the Council that would provide the revenues needed to fund the seven-year budget as well as the revenue needed for servicing and repaying the €750 billion of debt. In November, after a good deal of haggling between the Parliament and negotiators for the member states, the Parliament also approved the €1.074 trillion seven-year budget, which covers all EU spending in 2021-27 aside from the €750 billion in grants and loans. In December, the Council approved the new ORD that, if approved by all 27 member states, will provide the revenues needed to fund the seven-year budget and cover the costs of servicing the €750 billion of debt. The ORD permanently increases the maximum level of resources that can be called from the member states from 1.2 percent to 1.4 percent of EU Gross National Income and provides for a temporary increase in the ceiling by an additional 0.6 percent of EU GNI that will be devoted exclusively to financing the debt taken on to create the recovery fund. According to the text of the ORD, the 0.6 percent increase will terminate when all of the borrowed funds have been repaid and all contingent liabilities related to the loans have ceased, which should happen by the end of 2058 at the latest.

Having been approved by the EU Council, the ORD must be ratified by all 27 member states before the seven-year budget can take effect and the EU can begin borrowing the €750 billion needed for the recovery fund. The EU hopes to complete the ratification procedure for the ORD before the summer so the EU can start distributing the €750 billion in grants and loans based on proposals the states are currently submitting. By late March, 16 of the 27 member states had ratified the ORD. On March 25, the German Bundestag voted to ratify the ORD by more than a two-thirds majority and it was approved unanimously the next day by the Bundesrat, the body that consists of representatives of the sixteen states. In the normal course of events, the next and last stop in the ratification procedure would be the office of President Frank-Walter Steinmeier for his signature on the legislation approving the ORD.

However, just as Steinmeier was about to sign the legislation, the Federal Constitutional Court intervened and stopped the ratification procedure. It announced the president was not permitted for the time being to sign the legislation and thereby complete Germany’s ratification because its second senate—the Court has two senates, each one consisting of eight justices—first had to rule on an emergency motion for an interim injunction brought by the Alliance of  Citizens’ Will, a group of more than 2,000 citizens, including many economists. The group argues the EU is prohibited from issuing debt by EU law—specifically, Article 311 of the Treaty on the Functioning of the EU, which states that “the budget shall be financed wholly from own resources”—and that a decision to allow it to issue debt is therefore “ultra vires”—beyond its powers—and violates the treaty. In addition, the group argues that approval of the ORD would violate the rights of the Bundestag by making Germany (along with the other member states) potentially liable for the approximately €1 trillion in interest and principal that must be repaid over the 38 years from 2021 through 2058.

While the Court considers the motion, Germany’s ratification of the ORD is on hold, as is the future of the EU’s recovery fund, which can only be financed if the ORD is approved by all of the member states. It may only take a few weeks for the Court to review the matter and it’s quite possible that after doing so it will conclude the ORD violates neither German law nor the EU treaties. But based on past practice, it could take the Court considerably longer to review the matter and it could at some point refer the matter to the European Court of Justice, which would result in a further substantial delay in its deliberation. And however brief or protracted its review deliberation, the Court could, of course, decide in the end that approving the ORD would violate the EU treaty or the German constitution, or both, and prohibit the government from ratifying the ORD.

The Second Senate of the German Constitutional Court as it delayed German ratification of the EU’s plan to borrow €750 billion for grants and loans to the member states.

As the Court prepares to review the ORD and the EU braces itself for, at best, a delay in the ratification process and, at worst, a ruling that would prevent it from taking on the debt required in order to provide the member states with €750 billion in grants and loans, attention in Germany has turned to domestic politics—specifically, to a squabble between the Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU) over who will be their chancellor candidate in the September election—the first in almost 20 years in which Chancellor Angela Merkel won’t be their chancellor candidate. After experiencing significant setbacks in a number of state elections—most recently, last month in Baden-Württemberg and Rhineland-Palatinate—the leaderships of the CDU and CSU have been arguing, both behind closed doors and in public, about who should be their chancellor candidate. After several meetings of parties’ leaderships and parliamentarians, it’s still not clear who will be their chancellor candidate.

In January, the CDU elected Armin Laschet, who has led the CDU in North Rhine-Westphalia since 2012 and has headed a CDU-Free Democrat (FDP) coalition government since 2017, as the party’s leader. Since the CDU-CSU chancellor candidate is chosen by the leaderships of the two parties, which include the leaders of the CDU in fifteen of the sixteen German states and the leader of the Bavarian CSU, it’s not surprising that, when a Union chancellor is not running again, one of the CDU state leaders is almost always chosen to be the chancellor candidate. Indeed, the parties have chosen the CSU leader as the Union’s chancellor candidate in only two of the 19 federal elections—in 1980, when Franz Josef Strauss was the candidate, and in 2002, when Edmund Stoiber was the candidate. That being the case, one would expect that in ordinary times Laschet would be the CDU-CSU chancellor candidate.

But these are not ordinary times. Germany, like much of Europe, is in the midst of a third wave of the Covid pandemic, with the rate of new infections having increased dramatically over the past month. And as the country continues to struggle to beat back the new wave of infection, the CDU and CSU have experienced not only a series of electoral setbacks in recent state elections over the past year but more importantly, looking ahead to the September election, a precipitous drop in public support in polls since Laschet’s election as party leader in January.

In the 2017 Bundestag election, the CDU and CSU won 33 percent of the party-list vote. Over the fall and winter of 2019-2020, support for the CDU and CSU dropped to roughly 27-28 percent in the polls but then increased quite dramatically to nearly 40 percent as Merkel guided the country through the first wave of the Covid pandemic and played a major role in elaborating the contours of the EU’s recovery plan. But support for the CDU and CSU subsequently dropped off last fall to 35-36 percent, and since Laschet’s election in January support has plunged to little more than 25 percent, only a few percentage points ahead of the Greens. The message for the CDU and CSU from the recent polls is even worse than that; when asked who they would prefer as chancellor between Laschet, the leaders of the Social Democratic Party and the Greens, and none of the above, the latter—none of the above—wins in a landslide and Laschet places fourth.  

There are many in the CSU, and a good number in the CDU as well, who believe, especially after the CDU’s dismal performance in recent state elections and its precipitous drop in support  since Laschet’s election as leader, that Markus Söder, the CSU leader and minister president of Bavaria, would be a stronger chancellor candidate. And indeed, the recent polls confirm that view; when voters have been asked who they would prefer as chancellor between Söder, the leaders of the Social Democratic Party and the Greens, and none of the above, Söder places first by a substantial margin. If the voters had their way, Söder, rather than Laschet, would be the CDU-CSU chancellor candidate.  

We don’t know, of course, whether the drop in support for the CDU-CSU reflects the public’s judgment in regard to the federal government’s response to the third wave of the pandemic or its assessment of Laschet’s performance as the current leader of the CDU and possible future chancellor. But it certainly can’t have helped that in a Sunday evening television interview in late March, Merkel, in urging the leaders of the states do more to resist the third wave, including by implementing the “emergency brake system” agreed last March that would reinstitute some restrictions when the Covid infection rate increased above a specific level, said there were several states that “have a very broad interpretation” of the system—meaning they weren’t applying the brake—“and that does not fill me with joy.” Among the states not filling her with joy, she said, was North Rhine-Westphalia. That state’s implementation, she said, “entails too much discretion.” Laschet pushed back the next day, saying he had already applied the emergency brake, but the damage had been done. Merkel subsequently activated the “emergency brake” throughout the country.

Söder has served as the state’s minister of federal and European affairs, minister of health and the environment, and, for seven years until becoming minister president in 2018, minister of finance, regional development and home affairs. Over that period, he has been at times a forceful critic of the federal government in regard to its response to the eurozone debt crisis, the migration crisis and, most recently, the Covid pandemic, and he has been a forceful critic as well of the EU’s substantial delays in ordering, obtaining, and distributing the Covid vaccines. From an electoral perspective, he would probably be more effective than Laschet in bringing back to the CDU those who have defected in recent state elections to the xenophobic, radical right Alternative for Germany (AfD). He would obviously also be more effective in bringing back to the CDU those who have deserted the party over the past several months since Laschet became  leader. And he would probably be more likely to persuade the Greens to form a government with the CDU and CSU after the September election than Laschet, who has angered the Greens by supporting continued coal production in North Rhine-Westphalia.  

Söder has been the leader of the CSU for only a couple of years and the minister president of Bavaria for only three years and it seemed, until last weekend, that he had decided that the best place for him for the time being would be where he is now—in Bavaria. But at a meeting of the leadership of the CDU-CSU parliamentary group, he said, “If the CDU were willing to support me, I would be ready. If the CDU does not want it, then we will carry on working together without a grudge.” On Monday, after a meeting of the CDU executive committee, the state leaders of the CDU reached a preliminary agreement in favor of Laschet, for whom there was, according to the party’s general secretary, “broad support.” But Söder, saying the support of the CDU state leaders was not a sufficient mandate, called upon the CDU leadership to “go wider into the party.” Meanwhile, the CSU leadership, not surprisingly, formally backed him as the CDU-CSU chancellor candidate.

Talks are continuing between the CDU and CSU and a decision is likely to be reached this weekend. The odds no doubt favor Laschet; after all, he is the leader of the CDU and, as such, is the party’s leader in 15 of the 16 German states. But the CDU Bundestag members who will be running for reelection and the CDU candidates will no doubt be mindful of the fact that, as noted above, when asked in several recent polls who they favor for chancellor between Laschet, the leaders of the SPD and Greens, and none of the above, the latter wins in a landslide and Laschet places last whereas, when asked who they favor between Söder, the leaders of the SPD and the Greens, and none of the above, Söder wins by a substantial margin. An ARD Deutschland Trend survey published today reports that 72 percent of CDU/CSU supporters regard Söder as more suitable candidate for chancellor compared with 17 percent who preferred Laschet.

One would think that, notwithstanding their personal loyalty to Laschet, the CDU leaders in the states would prefer winning with Söder as the chancellor candidate to losing with Laschet as the candidate. And indeed some of them have begun to back away from supporting Laschet. Yesterday, Reiner Haseloff, the CDU leader and minister president of Saxony-Anhalt, where there will be a state election on June 6, called for the CDU to choose as chancellor candidate the person with whom the party has the best chance of winning—in effect calling for the party to choose Söder. And today, Tobias Hans, the CDU leader and minister president of Saarland echoed that view, saying, “It is absolutely clear that the question of which person you have a better chance with in the elections has to play a central role.” The national organization continues to stand behind Laschet. But that could change in the next few days.

David R. Cameron is a professor of political science and the director of the MacMillan Center’s Program in European Union Studies.