Merkel and Macron want a reconstruction plan worth 500 billion euros
As of: 6:42 p.m. | Reading time: 2 minutes
Germany and France jointly propose a European program worth 500 billion euros for economic recovery after the Corona crisis. To finance this, the member states should take on joint debts via the EU Commission. A novelty.
DGermany and France are launching a joint initiative for Europe’s economic recovery. Chancellor Angela Merkel (CDU) and French President Emmanuel Macron presented a program worth half a trillion euros in a joint press conference in Berlin and Paris.
The corona pandemic is “the worst crisis the EU has faced in its history,” said Merkel. Macron spoke of a “tremendous scale” crisis. This requires an “extraordinary, unique effort,” said Merkel. Germany and France are ready for this.
The most affected sectors and countries are to be supported with the 500 billion euros. Merkel also announced investments in digitalization, the health sector and a “green deal”. Macron also suggested that the tourism industry could benefit from the aid.
The explosiveness of the proposal lies in the details: The EU Commission is to borrow the money on the financial markets and repay it in the coming years via the EU budget. The repayment takes place over a very long period, said Merkel.
All EU countries would have to unanimously approve borrowing
It would be the first time that EU countries jointly borrow – and are therefore liable for one another. The EFSF, which was set up in 2010 to deal with the sovereign debt crisis, is self-financing on the capital market; the member countries only provide guarantees. The EFSF has now been replaced by the European Stability Mechanism (ESM), into which the member countries contribute according to the ECB key.
Debt borrowing by the EU Commission would have to unanimously approve all 27 EU countries. The expansion of the budgetary framework must also be ratified in all EU countries, in Germany by the Bundestag.
In fact, funding and payment arrangements for the program are highly controversial. Northern EU countries have so far refused to accept debts from the EU Commission, which are then passed on to affected countries as non-repayable grants. Countries such as France, Italy and Spain, however, insisted on such transfer payments in order not to increase their already large debts even further.
At the end of April, the summit of EU heads of state and government instructed the EU Commission to draw up a “reconstruction plan”. The aim is to get Europe’s economy out of recession quickly after the corona pandemic. Initially, volumes of one to two trillion euros were under discussion.
EU Commission President Ursula von der Leyen had to postpone the presentation of her proposal several times because of the differences. She now wants to present the plan on May 27th. An agreement between Germany and France could facilitate a compromise at EU level.