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Half a Trillion Euros
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Merkel and Macron Find the Strength for Europe
A DER
SPIEGEL Editorial by Peter Müller
France and Germany have once again banded together for
the greater good in Europe. Their show of unity was long overdue.
22.05.2020,
18.12 Uhr
When
Emmanuel Macron talks about a weighty new initiative, it sounds something like
this: "What we have accomplished here is sensational." When Angela Merkel
introduces the same plan, she says: "We've patched things up, so to speak,
between Germany and France."
In this
case, the euphoria of the French president seems more appropriate than the
sobriety of the German chancellor. The two want to cushion the economic
consequences of the coronavirus pandemic with a 500 billion-euro ($545-billion)
recovery fund that would apply to the entire EU. It's an historic step for the
bloc and a strong sign of solidarity from stronger member states toward weaker
ones.
If Merkel
and Macron have their way, the European Commission will be allowed to take on
significant amounts of debt for the first time. The money could then be
distributed as grants to member states that have been hit particularly hard by
the corona crisis. And, according to the concept as it stands now, they
wouldn't even have to pay the money back.
To date,
the German government has been unwavering in its rejection of a "transfer
union." But now, Merkel is taking a step in that very direction. To be
sure, Germany would not be liable for the entire 500 billion. At most, it would
only be on the hook for 25 percent -- the German share of the EU budget. That's
why, strictly speaking, Merkel is right when she says Germany has not consented
to eurobonds, or joint debt. Nevertheless, the current proposal would have been
unthinkable in the pre-coronavirus era.
Newfound Strength
Back in
March and April, it still seemed likely that COVID-19 could sound the death
knell for the EU. Fearful member states turned inward and began acting in their
own self-interest, posting border guards on internal frontiers and refusing to
show even the slightest hint of solidarity. Initially, Germany didn't even want
to export medical equipment. And then, the German government refused to agree
to corona bonds in order to provide aid to needy member states. The prevailing
attitude within the bloc appeared to be "every man for himself."
But now,
there has been a sudden change of heart: Germany and France appear to have
enough strength leftover for Europe, after all.
The road to
compromise was longer for Merkel than for Macron. Since taking office, the
French president has been pushing to make the eurozone crisis-proof. Among his
slew of initiatives, he has called for a common budget to help countries that
run into financial difficulty through no fault of their own. The pandemic and
its repercussions have been like a validation of this idea.
On top of
that, the crisis has further intensified countries' fears of Germany's economic
supremacy. Berlin can afford to prop up companies with subsidies, but other
member states lack the funds. A gesture of solidarity was long overdue.
Fortunately, Merkel recognized this. "The nation state alone has no
future," she said about the EU. "Germany will only prosper in the
long run if Europe prospers."
Politically,
Merkel can afford to cede some ground to the French president because she's
currently unchallenged in foreign and European policy. Unlike in the struggles
over the euro and Greece, she has no reason to fear rebellion from within the
ranks of her party. The recent German high court ruling regarding the
questionable legality of European Central Bank bond purchases has likewise
focused minds: The days in which European leaders could rely on the ECB bazooka
have passed.
Late but
Not Too Late
Now, it's
up to the French and German leaders to take advantage of their new momentum and
find a way to negotiate away the resistance of countries like Austria and the
Netherlands, both of which would prefer to get through the crisis without
European debt. As a compromise, there could be rules ensuring the 500 billion
euros aren't used to prop up the static status quo in southern Europe and are
instead invested in future-oriented projects. Because if the EU is going to
burden future generations with new debt, then those investments should at least
serve their interests, for example by protecting the climate.
But that
won't be enough. On the world stage, Europe is in danger of being crushed
between China and the U.S. There's also the migration issue, which has remained
unresolved for years. On the Turkish-Greek border, refugees have been dispersed
by gunfire. In Hungary, some were kept for a long time in camps that the
European Court of Justice has compared to prisons. These kinds of things
undermine Europe's foundation at least as much as a severe economic crisis.
Without a powerful commitment from Merkel and Macron, nothing will change for
the better, unfortunately.
Germany has
been late to spring to action, but not too late. Whether this newfound courage
will bear fruit will be decisive for the future of Europe.
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"Times of Struggle"
France and Germany Show the Way Forward in the
COVID-19 Crisis
For a time, it looked as though the crisis surrounding
the coronavirus could deliver a fatal blow to the European Union. But on
Monday, Paris and Berlin announced a new fund. There is still plenty of
opposition to overcome. By DER SPIEGEL Staff
22.05.2020,
18.08 Uhr
By
Christiane Hoffmann, Frank Hornig, Walter Mayr, Veit Medick, Peter Müller,
Britta Sandberg and Helene Zuber
Four video
conferences. That is how many times German Chancellor Angela Merkel and French
President Emmanuel Macron met without their European Union partners. They spoke
English, and each of the conversations lasted for more than an hour. The
subject was always the same: Establishing a fund for Europe.
There were
plenty of details and numbers to discuss, but a much larger issue was at stake:
the question of whether a European Union worthy of the name still existed or
whether it would disintegrate into its component parts under the weight of the
crisis brought on by the coronavirus.
Since
Monday, it has been clear: The talks between Macron and Merkel were successful
and there are now justified hopes that once the corona crisis is over, Europe
will emerge stronger and more united than ever before -- rather than as a weakened,
bickering mess. The plan for a "recovery fund," which the two leaders
presented in a joint video conference at the beginning of the week, is more
than just financial support for those European countries hit hardest by the
novel coronavirus. It is a grand vision.
For the
first time, the EU will take on a significant amount of joint debt. Some even
see the initiative as a step toward establishing a single European nation.
At the same
time, the plan assembled by "Merkron," as the German-French tandem
has been dubbed, is a compromise. Germany, in particular, has taken a
significant step, with Merkel abandoning principles that were essentially
untouchable during the financial crisis and the euro crisis that followed.
While the new fund will not be the equivalent of joint and several liability,
the huge sum of debt now being taken on by Brussels is a step toward the much
criticized "debt union."
It is a
risky move for Merkel as she approaches the end of her tenure. Times of crisis
are always "times of struggle," she said on Monday, "of
commitment to an idea." It's just that this particular idea was never one
that Merkel has been particularly fond of. That, though, has apparently
changed.
As she did
in the refugee crisis, Merkel is using her enormous popularity to lead Germany
on a courageous, if not particularly widely supported, path. And one of her
goals was likely that of correcting the widespread image of a miserly Germany,
of a selfish country that emerges strengthened from all crises, even as the rest
of Europe suffers and skimps.
A Thorn in
Merkel's Side
The German
chancellor has now taken the first step, but she and Macron will also have to
drum up the necessary support and their primary antagonist is likely to be
Austrian Chancellor Sebastian Kurz, who has already registered significant
concerns. He has long been something of a thorn in Merkel's side, in part
because of the widespread support he has found among conservatives in Germany.
The hope is now that a compromise can be found by the EU summit in mid-June.
The crucial
concept for the financing of the Merkel-Macron plan comes from European
Commission President Ursula von der Leyen. Late March saw the third corona
crisis video summit of European leaders end without agreement, a failure that
was largely due to Macron, who joined leaders from several other EU member
states in an alliance against Merkel. In a joint letter together with eight
counterparts, he demanded the introduction of corona bonds as a reaction to the
economic crisis -- essentially joint debt that would be, in a worst-case
scenario, backed by Germany alone.
The French
president had long hoped he would be able to reform the eurozone together with
Germany, but that vision had proved untenable with Merkel at the helm in
Berlin. In March, it appeared that he intended to use the crisis to heap
pressure on the German chancellor.
During the
March 26 summit, the video conference lasted for six hours, with Merkel joining
from home, where she was in quarantine. Macron remained largely in the
background during the debate as the heads of government from Spain and Italy
took the lead in fighting for euro bonds. "If you are waiting for corona
bonds," Merkel told Italian Prime Minister Giuseppe Conte, "they're
not coming." Ultimately, the problem was delegated to the Eurogroup of the
common currency's finance ministers.
But then,
at the end of March, an idea began to gain traction in the European Commission
for finding a way out of the dead end. Commission President von der Leyen badly
needed a deal on the EU budget, known as the Multiannual Financial Framework
(MFF), for the period from 2021 to 2027. In February, the last attempt to reach
a deal had failed.
That was
when the MFF became a central focus of efforts to combat the crisis, and Merkel
wasn't opposed. She could even imagine funneling more money into the EU budget
as a tool for combatting the crisis. Anything, she apparently believes, would
be better than corona bonds.
Focusing on
the EU Budget
The
problem, though, is that aside from Germany, Austria and the Netherlands,
hardly any other EU member can afford higher EU contributions. That conundrum
led von der Leyen to focus her attentions on the so-called "own resources
ceiling." The term refers to additional money for the EU budget that member
states don't have to send to Brussels, but have to keep in reserve for an
emergency. The upper limit of that reserve is now to be increased. And that
pledge will then allow the European Commission to borrow significant quantities
of debt from international financial markets.
That
borrowing is the backbone of the recovery fund, with French Finance Minister
Bruno Le Maire coming up with an early concept, which he presented in a
telephone conference on April 2. And a short time later, Macron changed course,
realizing that his goal of an ambitious response to the corona crisis could be
better achieved through the EU budget than by continuing to insist on corona
bonds, given that Merkel and northern EU member states remain adamantly opposed
to that tool.
Von der
Leyen introduced the MFF idea in an April 23 video conference, with EU heads of
state and government authorizing her to develop the concept. "Don't forget
to talk to us first," Merkel told von der Leyen at the end of the
conference, a not particularly subtle reminder from the German chancellor that
when it comes to money, it is the member states that have the power. After that
video conference, Merkel and Macron began their series of discussions.
"The
beauty of this plan was that it is both ambitious and practicable," says a
French diplomat. The key details were primarily agreed on during the second
week of May, "but it was also the fruit of the three-year relationship
between the two."
Until the
very end, von der Leyen's team was in almost daily contact with the Chancellery
and the Élysée, the seat of the French presidency. Merkel's chief of staff,
Björn Seibert, was in contact with her Europe adviser Uwe Corsepius, while
Seibert's deputy Stéphanie Riso spoke frequently with Macron's Europe adviser
Clément Beaune. Sometimes they would all join the same video conference.
To ensure
that nobody lost sight of the most important points, a blueprint of the plan
was drawn onto a whiteboard in Seibert's office on the 13th floor of
Berlaymont, the Commission headquarters in Brussels. It is a rather chaotic
diagram, covered with arrows and notes. Von der Leyen had to repeatedly push
back the presentation of her plan, holding discussions with 20 heads of state
and government last weekend alone in an effort to account for all of the
competing interests.
A Temporary
Measure
For
Brussels, the debt plan means an enormous increase in influence. The European
Commission will become an independent player on the capital markets, a
revolutionary step. Aside from a brief exception during the euro crisis, Merkel
never handed Jean-Claude Juncker -- von der Leyen's predecessor -- that much
power. And even now, the German chancellor has insisted that the recovery fund
be but a temporary measure, saying it is an exception.
That is
primarily an effort to assuage conservatives in the German parliament, because
the plan is a difficult one for Merkel's own party, the Christian Democratic
Union (CDU), to accept. With the exception of the refugees, no other issue has
proved as controversial during the Merkel era as the discussion about joint
European debt. To address such concerns, Merkel spoke on the phone last weekend
with influential conservatives, including parliamentary group leader Ralph
Brinkhaus and Markus Söder, head of the Christian Social Union (CSU), the CDU's
Bavarian sister party. She also spoke with Alexander Dobrindt, head of the CSU
group in federal parliament. Merkel's hope was that the conversations would
ensure that nobody stood in the way of the initiative.
Leading
German conservatives have spent years fighting hard against the concept of
joint debt, to the point that many are now facing a rather difficult about-face
to support Merkel's initiative. Many are concerned that the Merkel-Macron
package will be received by parts of the electorate as a sellout of German
interests. That could serve to strengthen the right-wing radical Alternative
for Germany (AfD), which has already emphasized its opposition to the plan.
Nevertheless,
there has been relatively little resistance among German conservatives thus
far. The proposal is not a violation of European treaties, say those involved,
and is just a one-off anyway. More important, though, is the authority Merkel
has recently recovered. In the corona crisis, she has managed to lead
conservatives back to public opinion survey results that had seemed well out of
reach just a few months ago.
"A
Victory Hymn"
For Macron,
the joint initiative is something of a delayed gratification. After years of
futile campaigning and numerous disappointments, he has finally taken a
significant step toward fulfilling his campaign promise of creating a strong,
united Europe. And it came just as it was most needed: In contrast to all other
European leaders, the pandemic has not given Macron a political boost. In
surveys, he is currently behind the prime minister and has an approval rating
of just 40 percent.
As such,
the new German-French agreement could prove even more serendipitous when it
comes to French presidential elections in spring 2022, should Macron be
measured by the promises he has made. It would also take wind out of the sails
of right-wing populist Marine Le Pen and her claims that in times of need,
Europe leaves people to their own devices and fails to protect them.
In Spain
and Italy, which will likely be the greatest beneficiaries of the recovery
fund, government reactions have been positive. "Conte sings a victory
hymn," wrote the daily La Repubblica. Rome is hoping to receive around a
fifth of the funds that will be made available, around 100 billion euros ($109
billion).
Conte's
biggest concern is now that ensuing negotiations with the rest of the EU could
result in the size of the fund being reduced. To prepare for the battle, he has
provisionally ratcheted up his own demands, saying: "To overcome the
crisis, we have to expand the recovery fund."
Overcoming
Resistance
The
strongest resistance to the German-French initiative is coming from the
"Frugal Four" -- sometimes less-charitably called the "Stingy
Four" -- of the Netherlands, Sweden, Denmark and Austria. Chancellor Kurz
of Austria has already announced an alternative proposal, and his Dutch
counterpart Mark Rutte is also under domestic pressure to avoid taking even a
single step toward the Merkron plan. Back in February, Rutte brought a
biography of Chopin with him to the bloc's budgetary summit to pass the time,
saying "our position is known and I don't see what there is to
negotiate." Merkel is not a fan of such gestures.
The
Visegrád Group is also rather skeptical of the plan. In the Czech Republic and
Slovakia, but particularly in Poland and Hungary, there is significant concern
that the fund could pose a threat to the large amounts of money they have been
receiving from agricultural subsidies and from European structural funds. Czech
Prime Minister Andrej Babiš said that the Merkel-Macron plan essentially
punishes countries like the Czech Republic, whose management of the corona
crisis, he says, has worked.
If you
combine the Frugal Four with the Visegrád Group, about a third of the EU is
critical of the Merkel-Macron project. But the Commission has a plan for
winning them over. One idea is that of investing the money in future
technologies. Furthermore, conditions are to be attached to the money. And
finally, to meet a key demand from the Frugal Four, the money won't just be
provided in the form of hand-outs, but also as loans.
Ultimately,
it seems likely that resistance to the plan will be overcome. Most politicians
in Europe know that the bloc is in dire need of an agreement, if not at the EU
summit in mid-June then, at the very latest, during Germany's council
presidency, which begins in July. And now that the ball is rolling, Paris
believes, it will be hard to stop it. An adviser in the Élysée says that
Merkel's strong political gesture will make it extremely difficult for the
plan's opponents to reject it.
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