EU and Fund for Reconstruction: Ursula von der Leyen’s Europe



S.it was always there, but never in the foreground. He didn’t have the right to vote, but his voice had a weight. At the summit of the July marathon, where the EU agreed on a financial package of € 1.8 trillion, Commission President Ursula von der Leyen usually sat at the negotiating table with the heads of government.

This Tuesday marks the first anniversary of the inauguration of the President of the German Commission. In his mandate to date, Europe has already changed radically and the head of the Commission has laid the groundwork for this. Von der Leyen remained in the background, but the German politician’s Europe became visible at the July summit. It is a Europe which, when in doubt, is much closer to what France has been asking for for many years. And far from what former Leyen boss Angela Merkel defended during the euro crisis.

Even during the euro crisis, Germany led the field of countries that insisted on budgetary discipline. Angela Merkel had now moved closer to France’s side – only the “thrifty four”, Austria, the Netherlands, Denmark and Sweden fought for budget discipline. In the end, the heads of state and government decided for the first time what French politicians have been asking for for many years, against which many capitals, especially Berlin, have resisted for a long time: a sort of European state budget, the fund for the reconstruction of the € 750 billion EU in the Crown crisis. .

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To finance the reconstruction fund, the European Commission would have to incur large debts on the financial markets for the first time and funnel the money raised there as transfers and loans to Member States. For the first time, the EU can act as a national finance minister.

The amount of the fund is limited and should initially remain a one-off response in an exceptional situation. But early politicians such as Christine Lagarde, head of the ECB, are already demanding that the fund and the ability to borrow be maintained over the long term.

On Monday, for example, the International Monetary Fund (IMF) said that although the recovery fund is not the euro zone’s balance sheet, the IMF has long requested, “a positive experience with the recovery fund could help build political support for it will ultimately introduce a family capacity “.

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“Budgetary capacity” describes the competencies of national finance ministers: to incur debt, collect taxes and spend money. For critics it is entry into a European “debt union”. During the Corona crisis, a new European dynamic emerged. This paradigm shift was led by European capitals, but von der Leyen set the course in the background.

In the spring, for example, after the Coronavirus had arrived in Europe and the continent was blocked. It quickly became clear that Europe was headed for the biggest economic crisis since World War II and that businesses and workers needed unprecedented state aid. Italy, Spain and France immediately asked for solidarity at the European level. Germany initially rejected the requests, notably those from Paris for euro bonds, i.e. common European debts with unlimited liability.

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But after a € 500 billion package of aid loans was put together in the spring, the political pressure continued. It came mainly from Italy, where populists on the right and left fed anti-EU sentiment in the country with their rhetoric. The mood was so hostile to the EU that there was no fear of an Italexit in Brussels and elsewhere; an exit of Italy from the EU – which would have meant the end of political union and monetary union.

Soon there was talk of concrete sums, sometimes over 2,000 billion, sometimes over 500 billion, and for the first time there was also discussion of allowing any crown aid from the EU to go through the EU budget, which is administered by the European Commission.

The routine and efficiency of an existing authority spoke in favor of this. But it was also clear that if the EU Commission suddenly distributed several hundred billion euros in addition, its influence would increase significantly – and with it that of Commission President von der Leyen.

250 billion euros of credit more

When Chancellor Angela Merkel and French President Emmanuel Macron finally got together in May to present their 500 billion Crown aid plan, von der Leyen was not connected. But it was also his plan.

Merkel and Macron had coordinated in advance with the President of the Commission, and when shortly after he presented the Commission’s proposals for Crown aid, they were based on the Merkel-Macron proposal: in addition to the 500 billion transfers, 250 billion should be added euros of loans come. The Commission was therefore able to add something to the Franco-German proposal without harming the governments involved; The loans would eventually be repaid by the beneficiaries.

The Commission’s proposals also formed the basis for negotiations at the July marathon summit. The summit agreement not only ensured support for countries particularly affected by the Crown. Suddenly hundreds of billions of euros were available with which von der Leyen was able to finance the two central objectives of her presidency: the European Green Deal and the digitization of the European economy.

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The summit resolution expressly stipulates that much of the money should go into both policy areas. Suddenly the two come together: the huge ambitions of the policy and the budget it has at its disposal, even though the reconstruction fund and the long-term budget are currently blocked by Poland and Hungary.

In any case, only the next few years will show what von der Leyens’ Europe will look like: if it remains so divided that EU countries still cannot agree on key issues such as migration. If the European economy is indeed becoming greener, more digital and at the same time more competitive. What if the reconstruction fund really remains a historic exception or the first step towards a permanent European budget.

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