SHARE
COPY LINK

ANGELA MERKEL

Merkel wins surprise backing from Germany over EU aid U-turn

Chancellor Angela Merkel shattered a long-standing German taboo last week when she unexpectedly unveiled a plan to fund the EU's coronavirus recovery through shared debt.

Merkel wins surprise backing from Germany over EU aid U-turn
Angela Merkel. Photo: DPA

It was a stunning U-turn after years of German opposition to joint borrowing, but the risky political gamble appears to be paying off.

The veteran leader, set to end her political career next year, has already won the backing of key members of her conservative CDU party for the proposed €500 billion ($544 billion) EU recovery fund, aimed at helping the nations hardest hit by the pandemic.

Surveys show that a majority of Germans are also on board.

“I have no doubt that there is broad support for this proposal in the German national parliament,” Bundestag president and CDU heavyweight Wolfgang Schäuble said in an interview with AFP.

The recovery plan, thrashed out with French President Emmanuel Macron, may ultimately never win over sceptical EU member states such as Austria and the Netherlands.

But observers say tectonic plates have started shifting in Germany and the debate about what it means to show European solidarity will never be the same again.

READ ALSO: Merkel and Macron propose €50 billion plan to relaunch EU economy

'Necessary'

The Merkel-Macron plan is “a necessary and important proposal during this time”, said Schaeuble, who is also a former finance minister and remains highly influential in Germany.

“It calls on Europe to use this crisis to become stronger and more dynamic,” he said.

Like Merkel, Schäuble has long resisted the idea of EU joint borrowing over fears that fiscally disciplined nations — such as Germany – would be forced to pay for the excesses of their less frugal partners — such as Italy or Greece.

During his eight years as Germany's powerful paymaster, Schaeuble was admired at home for his strict balanced budget policies.

But he became a hate figure abroad during the eurozone debt crisis for his insistence on tough austerity for debt-mired nations like Greece.

The coronavirus pandemic however requires a different response, he argued.

READ ALSO: Can Merkel rally Germans behind massive EU package?

In their landmark gambit, Merkel and Macron suggested that the European Commission, the EU's executive arm, borrow on the markets to raise the recovery funds.

The money would be handed out as grants to help the most stricken among the EU's 27 members bounce back, like Italy and Spain.

The 500 billion euros would be paid back through successive EU budgets, with Germany as Europe's top economy funding around 27 percent of it.

Top brass from Merkel's CDU endorsed the Franco-German plan at a meeting of the party's executive committee on Monday.

“Germany will only do well if Europe does well,” Merkel told participants, according to a source at the talks.

EU presidency

Merkel still faces some obstacles. The CDU's most conservative faction, known as the Values Union, has slammed the proposal.

The head of the faction, Alexander Mitsch, has urged German and European lawmakers to resist the planned fund, which he described as “another step” towards turning the European Union into a “debt union and a centralised state”.

Similar criticism has also come from Germany's far-right AfD, the largest opposition party in the Bundestag, and from the smaller pro-business FDP party.

But 51 percent of Germans support the Merkel-Macron effort, according to a survey by the Civey institute for Der Spiegel weekly. Around 34 percent of respondents opposed it.

It is an early victory for Merkel who is riding high in the polls over her coolheaded, science-based handling of the pandemic so far, which has helped keep Germany's COVID-19 deaths lower than in neighbouring nations.

With little left to lose as she readies to bow out at the next general election, slated for late 2021, observers say Merkel is staking much of her political capital on the recovery fund.

“She was eager to reaffirm Germany's European commitment after pretty harsh criticism from Italy and Spain” over a perceived lack of solidarity in the coronavirus crisis, a source close to Macron told AFP.

“She is also keeping in mind Germany's EU presidency from July. She wants to leave her mark.”

By Peter Wuertherich

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

COVID-19

Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.

SHOW COMMENTS