German top court declares €800bn EU recovery fund 'legal'

Although there is "serious doubt" the fund is legal under EU law, "it cannot be clearly ruled out" that it is not, the ruling said.

The legal challenge was brought by Bernd Lucke, co-founder of the hard-right Alternative for Germany (AfD) party and Heinrich Weiss, a former head of the German industry lobby group, the BDI.

The complainants had demanded that Germany withdraw from the programme, or terminate it altogether, as it had no basis in EU law. But in a ruling of six-to-one, the challenge was thrown out. If their challenge had succeeded, and the court had ruled that the fund violated the German constitution, the case would have been referred to the European Court of Justice in Luxembourg.

In his lone dissenting opinion, judge Peter Müller said the ruling "leaves all the relevant questions of EU law unanswered."

"To see the curtain down with nothing settled seems to me a rather ill-suited approach to the effective protection of the fundamental right of democracy," he wrote.

The ruling was hailed as a victory by green groups who have advocated for EU borrowing as a way to increase sustainable investment in Europe.

"We Greens welcome the judgment of the constitutional court," German MEP Rasmus Andresen tweeted shortly after the ruling was published. "Europe must be able to act economically during crises."

The so-called NextgenerationEU pandemic fund allowed the commission to borrow money and pass it on as a grant or cheap loan to member states to help restart the economy after the lockdowns.

A similar model has now been proposed to help EU member states deal with the energy crisis.

And ahead of a meeting of finance ministers on Tuesday, EU Commission president Ursula von der Leyen and French finance minister Bruno Le Maire had both called for a similar fund, backed by EU borrowing, to help bolster the bloc's sustainable industries.

On Monday, German and Dutch finance ministers firmly rejected new EU borrowing, insisting on using existing financing tools first.

But Tuesday's ruling will likely feed into the debates on whether the EU should be allowed to take on new debt to help member states deal with current and future crises.