27 May 2020

When the “impossible” becomes “possible”

Negoiţă Sorin

The coronavirus has generated the hugest crisis Europe ever faced and to limit its spread and even eliminate its consequences the European states must come with the proper answer, coordinated with Brussels. So far, this coordination is shoddy and has created the conditions for a political confrontation between the North and South of Europe, weakening the European solidarity. Therefore, addressing the EU member states, the German chancellor, Angela Merkel, was extremely determined when saying “We must act in a European way so that we get out of this crisis well and strengthened”.

Image source: Mediafax

Lately, Germany was quite distanced and even “uncommitted” to a series of initiatives launched in the European space, particularly by the “historical partner”, France. Furthermore, after the coronavirus pandemic started in Europe, the German executive was reticent and even “selfish” when it came to European allies’ proposals for the implementation of joint measures, to help the member states, particularly those which were strongly affected by the pandemic. Totally unexpected, the German chancellor, Angela Merkel, and the French president, Emmanuel Macron, have presented to Europe, may 18th, Monday, within an online press conference, a joint German-French economic adjustment initiative the European Union’s economy.

The initiative, which proposes the establishment of an ambitious recovery-fund, worth of 500 billion euro, aiming at helping Europe recovery from the pandemic’s crisis, comes when a joint policies proposal seemed almost impossible. Talking about this, the German chancellor Merkel stated that “The purpose is for Europe to get out of the crisis, more cohesive and solidary”. Moreover, the fund will contribute to making sure all European countries will react accordingly to the created situation. The chancellor added that “This thing needs a major, unique effort Germany and France are ready for”.

After many “misunderstandings” within EU, particularly in terms of the political, economic and financial reforms, France and Germany managed, apparently, to send a strong “European solidarity revival” message, which was somewhere in a  drawer in Brussels’ headquarter when the pandemic started. On the other hand, the initiative may look like a “victory” for president Macron, who unsuccessfully tried to “get” his partner Merkel in different projects aiming at EU’s reconstruction and consolidation.

The revival plan is based on a project for a common reconstruction fund, presented by the French Finances Minister, Bruno Le Maire, on April 2nd, which was partially modified and sent, at the beginning of this month, to Berlin. During all this time, the two parts were permanently negotiating, and the two leaders from Berlin and Paris had many phone calls aiming at making the best decision to that end. Therefore, when many Paris officials stopped hoping for Merkel’s “conversion”, the negotiations’ success was expressed through the common French-German project, launched on May 18th, by the leaders of these two countries.

According to the joint project, the “recovery fund” will financially support from EU’s budget the most affected sectors and regions from the coronavirus’s economic consequences and should be available for the EU member states for a limited period. As Merkel said, the money should be available as “budgetary costs” and not “credits”. The German chancellor’s perspective was approved by the French president Macron, who said that the “500 billion euro will not be reimbursed by those who received them”.

Besides the 500 billion euro, which should be absorbed from the capital market by the European Commission and offered to countries going through crisis as an aid through the EU’s multiannual financial framework, France and Germany proposed also a new European approach in terms of the strategic sovereignty in the health sectors, the advance of the “Green Deal” and digitalization, as well as the consolidation of EU’s economic and industrial sovereignty and resilience, and also the European internal market. Both leaders think the European Commission should come up with a proposal based on the French-German initiative, to be agreed also by the EU’s 27 member states.

How is the initiative supported in the French and German environment?

The Merkel-Macron project has almost unanimously supported in France. The former economic counselor of president Macron, economist Jean Pisani-Feryy, wrote for “Liberation” that “history may prove that the Corona crisis unexpectedly advanced the European integration”.  

The surprise is even bigger for the French people as Germany was quite distant from the other states during the crisis created by the coronavirus pandemic. The takeover and treatment of the French patients affected by the SARS CoV-2 in the German hospitals was one of the few cooperation signals between the two countries, in the last period, after the borders closed. On the other hand, it seems that the pandemic has created a “breach” between the states in North Europe, among them being also Germany, which were quite reticent in using the EU’s common funds to redress the other states and the South of the continent, where the most affected states, France, Italy and Spain have asked for support to stop or eliminate the pandemic. So, the recent French-German proposal is a step ahead the European integration process and a hope for the “European solidarity” consolidation. It is still possible for the initiative to provoke contradictory discussions within the Union.

In the Christian-Democratic camp from Germany the initiative is also an “important proposal (…) which needs a European solution”, according to CSU’s leader (sister-party of Bavaria’s CSU), Markus Soder, through the chief of Bavaria’s land chancellery, Florian Hermann. Also, Soder’s party partners, Manfred Weber, the leader of the parliamentary group of the European Popular Party in the European Parliament, called the initiative “fair and necessary”, thinking that solidarity is so needed now, relevant to that end being the European Commission’s prognosis, which foresees “dramatic economic developments” in the European states. Furthermore, the Budenstag’s president, Wolfgang Schauble (CDU) is planning a joint support statement for the initiative, together with his French homologue, Richard Ferrand, to be presented in the special session of the German-French Parliamentary Assembly, on 28th of May.

The coalition partners of the Christian-Democrats, the Social-Democrats (SPD), also agree with the initiative, through the voice of one of the two leaders, Norbert-Walter Borjans, saying that “it does not come at the right time”, but who thinks that “there is an urgent need for help for the countries that were affected by the coronavirus pandemic, not a begging from the rich ones for the poor member states, but an EU joint effort”.  Through his statements, he supports his party colleague Olaf Scholz, Finance Minister in Merkel’s Cabinet, who contributed to the plan.

The European Commission's reaction to the proposal of the two important European leaders

European Commission President Ursula von der Leyen reacted promptly on the same day and welcomed the Franco-German proposal, saying it "acknowledges the scope and the size of the economic challenge that Europe faces, and rightly puts the emphasis on the need to work on a solution with the European budget at its core”. Von der Leyen also added that "this (the Franco-German initiative) goes in the direction of the proposal the Commission is working on which will also take into account the views of all Member States and the European Parliament Parliament".

As everyone knows already, at the videoconference of the European Council members on 23 April, European leaders agreed to set up a recovery fund and, in this regard, instructed the European Commission to analyze the main needs and to draw up a "reconstruction plan" to be presented as soon as possible. Referring to this fund, the President of the European Council, Charles Michel, stated that "This fund must have sufficient capacity, be targeted at the most affected sectors and geographical areas in Europe". However, the method of financing and the size of this fund, which, from the Commission's point of view, would involve both loans and grants, proved to be difficult to establish, which is why von der Leyen had to postpone several times the presentation of the plan.

Now, the President of the Commission appreciates the "recovery plan" and seems optimistic, stating that she plans to incorporate the proposals made by France and Germany into the future multiannual financial framework 2021-2027. In fact, she should make a first presentation of Brussels' plans and the future EU joint budget on, May 27th, in the European Parliament. The initial planning details have already been circulated within the member states in Brussels, but two very important issues still must be clarified until a final decision is taken. These issues concern, on the one hand, the extent / size of the so-called "relaunch instrument" and, on the other hand, the need to decide on how to provide financial support to countries affected by the crisis - grant / donation, or repayable loan. This second aspect still seems to give a lot of headaches to Brussels.

In order to mobilize the EU Member States, but also to meet the European Commission's efforts to draw up proposals for the recovery and reconstruction of Europe, Charles Michel also welcomed the "relaunch plan" offered by the Berlin-Paris tandem, as "a step in the right direction "and called on the 27 member states to show cohesion and to engage constructively in order to "reach a balanced agreement".

The EU member states’ stances are different on the French-German initiative

The Franco-German proposal, which at first glance should create a positive emulation at European level and bring European states to a common denominator for overcoming the crisis, does not seem to be sparking much enthusiasm among all EU member states. It is still too early to anticipate whether all the other 25 EU members will agree with Brussels' proposal, which appears to be largely based on the "recovery fund" proposed by Germany and France.

The first reactions were not long in coming. Thus, shortly after the joint press conference of Merkel and Macron, Austrian Chancellor Sebastian Kurz, most likely the clearest opponent of such an initiative, contacted his colleagues in Sweden, the Netherlands and Denmark and stated that the positions of the four remain unchanged. They think countries affected by the coronavirus pandemic crisis should be supported by loans and not by subsidies.

Kurz's position was confirmed by the finance ministers of Austria, the Netherlands and Denmark, who made clear their national preferences for a repayable loan fund, during an Ecofin video conference, just 24 hours after the Franco-German proposal. To further strengthen their position, Austrian Finance Minister Gernot Blümel said that " What we cannot support — but what DE and FR propose — is that the EU borrows on the markets to finance non-repayable grants.” The surprise came from Swedish Finance Minister, Magdalena Andersson, a well-known critic of subsidies, who said Sweden would wait for the European Commission's proposal on May 27 to present its position.

On the other hand, Italian Prime Minister Giuseppe Conte welcomed the program presented by his French and German colleagues, while the former vice-president of the Italian Council of Ministers, Matteo Salvini, wondered if there was still an EU and saw the initiative as an action to actually impose the decision of the two European leaders, German and French. The other country strongly affected by the coronavirus pandemic, which could benefit from "recovery money", Spain, had a euphoric reaction to the announcement of the initiative. In this regard, Spanish Prime Minister Pedro Sanchez, a supporter of the "recovery fund", wrote on Twitter that the initiative "is in line with our requirements" and must continue.

Merkel and Macron also had the support of Portuguese Finance Minister Mario Centeno, who called on EU colleagues to be inspired by the Franco-German proposal and "overcome differences in times of crisis", but also by the finance minister. Luxembourg's Pierre Gramegna, believes that the joint approach "will strengthen solidarity and strengthen economic growth" at EU level.

Despite these statements and support, the "four rebels", Austria, the Netherlands, Sweden and Denmark, insist on a counter-proposal on setting a deadline and continue to reject subsidies, agreeing to support the states affected by the pandemic by granting of repayable loans. All given that the European Commission has set as the date for the recovery plan’s presentation and the multiannual financial framework 2021-2027 before the European Parliament to be on Wednesday 27 May.

This position is harshly criticized in both Germany and Italy. In this matter, the chairman of the Foreign Affairs Committee of the Bundestag, Norbert Röttgen (CDU) stated that "The proposal of the four 'stingy' is a unique challenge, because it will not solve the problem, but will intensify it". He thinks the excessive debts of some countries cannot be resolved by offering additional debt. Italian Minister for Europe, Vicenzo Amendola, also said that "Italy contributes to the EU budget as much as all four countries together", and former European Commission President Romano Prodi believes that the four countries could to maintain their resistance if Germany, France and Italy "would decided to go their own way".

The unprecedented initiative, proposed on May 18 by France and Germany, is another innovative tool in the history and practice of the European Union, which is nothing but an important step for “selfishness” elimination that’s installed in the EU members since the pandemic started in Europe. On how effective this French-German process will be and how will “the four rebels” react and what will be the European Commission’s role in coordinating the economic relaunch action of the European states are just some of the questions the 450 million people of Europe’s states are waiting answers for, possibly to be publicly offered on May 27th.  Or, at a disadvantage for everyone, it will deepen even more the “breach” created between the North and the South and will strongly hit the European solidarity.

Translated by Andreea Soare