A Long-Awaited Breakthrough?
It took a pandemic, but Germany’s Angela Merkel has at last agreed with French president Emmanuel Macron that a fiscal response to the crisis is necessary, that it will be achieved by increased spending from the common European Union budget, and that it will be financed by common European debt. As Le Monde says, this is nothing short of a “revolution”:
Mais le fait que le couple franco-allemand se soit mis d’accord sur les grandes lignes d’un plan de relance financé par une dette commune des Etats européens, émise par l’Union et dépensée par le biais du budget européen, est en soi une révolution. Car ce sont deux tabous qui sont finalement tombés outre-Rhin, au fil de ces dernières semaines.
To be sure, there are caveats. With the EU there always are. Half a trillion euros is no doubt too little, given the magnitude of the crisis. This agreement was forged between France and Germany and must still be sold to the other member states, including the so-called “Frugals,” who may not be easy to convince. Spending targets have yet to be specified, and the modalities of the common debt also remain vague. But the principle is clear: the rescue this time cannot be left to the European Central Bank alone, and it will take actual spending, not just backstop guarantees, to jump start the recovery.
The fact that Merkel and Macron were able to agree vindicates those who continued to hope against hope that die Kanzlerin would find a way to overcome the reluctance of so many of her compatriots to countenance an enlarged EU budget. Who can say where Merkel herself stood on the matter? But her intelligence told her that without dramatic action, the EU would not survive this crisis. Perhaps the recent ruling of the German Constitutional Court, which threatened to dampen whatever firepower the ECB has left, pushed her to abandon her wait-and-see position.
It is too soon to say that this changes everything. But it almost certainly changes a lot. The reactions of the Franco-German couple’s European partners will be interesting to watch over the coming days.