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.
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.