Ambitious EU recovery fund will be the greatest test of European solidarity yet
It’s hard to see what’s what and how it all fits together. It’s like a jigsaw in which the pieces keep getting bigger and bigger and the picture on the box, which started out as Sunflowers, by Van Gogh, has somehow achieved the size and complexity of Rembrandt’s Nightwatch.
Yesterday, the European Commission came up with its blueprint for a €750 billion (£673bn) aid package intended to help EU member states, particularly those in the Deep South, recover from the disastrous economic impact of the coronavirus.
A week previously, President Emmanuel Macron of France and German Chancellor Angela Merkel proposed a €500bn package. In April, Charles Michel, the president of the European Council, representing all 27 member governments, said that a recovery plan, costed at €540 billion, had been agreed that, once approved, would be operational by June 1.
No doubt the three plans will dovetail in some form and, like a complicated jail sentence, will run concurrently rather than consecutively. But as the schemes keep on coming, one is left to wonder what else will be on the table two weeks from now and who will be signing the cheques.
The lastest proposal, dubbed (in English) Next Generation EU, as if it were an upcoming season of Star Trek, was outlined yesterday to the European Parliament by Commission President Ursula von der Leyen. It was, she said, an investment in Europe’s future that, by safeguarding the “Green Deal” and advancing a digital future – the two key aspects of her presidency before the advent of Covid-19 – would boost jobs and growth across the Continent.
“This is Europe’s moment,” she told MEPs. “Our willingness to act must live up to the challenges we all face. With Next Generation EU, we are providing an ambitious answer.”
Well, up to a point, Madame President. Not only are the sums vast and the beneficiaries not currently proccupied with either climate change or Big Tech, but the heads of government have not yet had their say. President Macron and Chancellor Merkel are for the plan, as, for obvious reasons, are the leaders of Italy and Spain, whose two countries could be expected to swallow up at least half per cent of the available cash. But the Netherlands, Austria, Denmark and Sweden, known as the Frugal Four, have already voiced strong reservations. In Germany, too, there will be opposition to a scheme that would have to have Berlin’s backing but would reward precisely the sort of profligacy that had imperilled the European Project long before the arrival of Covid-19.
Earlier this month, the German Constitutional Court warned of the likely illegality of German participation in shared-risk coronabonds as demanded by Rome and Madrid, for which Germany would ultimately pick up a large portion of the bill. Given that all the rescue plans so far put forward, not least by Mrs Von der Leyen, include provisions for EU-backed loans valued at hundreds of billions of euros, it is far from certain that the court will give Berlin (and Brussels) the green light to proceed.
But even if Angela Merkel can muscle her way through the constitutional thickets, there are still the Dutch, Danes, Austrians and Swedes to contend with. Solidarity is one thing, and the EU has always been good at it. But it has to be balanced with responsibility, and in these more nationally-minded times, Italy in particular has come to be seen as a bottomless pit for debt, opening into a black hole.
According to the Commission plan, the EU will borrow €750 billion for the recovery fund from the global money markets, including, presumably, those based in China. The money would then be repaid in tranches down the years through greatly expanded EU budgets – budgets that themselves would be endowed principally by the northern states, most obviously Germany.
Within the overall fund would be a “recovery and resilience facility,” valued at €560bn, €250bn of which would take the form of loans and the rest – €310bn – by way of direct grants.
Italy’s prime minister Giuseppe Conte was understandably cock-a-hoop at the prospect of massive sums of relatively free cash coming his way. “Great signal from Brussels,” he tweeted. “Now let’s speed up the negotiations and free up the resources quickly.”
Spain’s Pedro Sánchez was equally enthusiastic, noting that it was a response to many of his country’s demands.
As for Germany and the other reluctant guarantor nations, who knows? It is plain that something must be done if the European Project is not to stutter to a half, and it is usually the case in Europe that those with the broadest shoulders are left to carry the heaviest burden. There is, moreover, the argument that the euro was always designed to enrich the North without much regard to the problems of the South. Viewing the crisis from the other end of the telescope, Italy and Spain, as well as Portugal and Greece, see only the problems of wealthy nations that benefited enormously from the single currency in the years of plenty and are now duty bound, not least by their oath of solidarity, to help those in distress further down the chain.
Straddling the Union’s fault line, with two thirds of his country in the prosperous North, the other third either literally or metaphorically in the South, President Macron will be pushing the Von der Leyen plan as the only means of holding the EU together at a time of unprecedented fragmentation and uncertainty. From the other side of the Rhine, he can expect the backing of Angela Merkel, who, as a result of her adept handling of the corona crisis in Germany, has probably rebuilt sufficient political capital to get her way one last time before she prepares to hand power to a new and more cynical generation.
The gauntlet has been thrown down. Several, in fact. Will the Frugal Four find allies in the urgent talks that lie ahead, or will they agree, albeit through gritted teeth, to take out their wallets? The future of Europe could hang on their decision.