Merkel ready for significantly higher EU budget

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Berlin / Madrid Three days before the EU summit, a compromise is emerging as to how EU states particularly affected by the corona crisis could be given more support. You can imagine a significant increase in the EU budget and bonds backed by guarantees from member states, said Chancellor Angela Merkel said on Monday.

According to experts, this could help to find a middle ground between the demands of the Euro countries and the Netherlands, for example, which categorically exclude Eurobonds.

Merkel’s comments also indicate a clear departure from Germany’s position in the EU budget negotiations for the period up to 2027. Up until now, Germany, like some other net contributors, had urged that payments to Brussels not increase far beyond one percent of national economic output.

Now, in view of the corona crisis, Merkel said: “I can very well imagine that (the EU budget) must have completely different financial options in the first years after the pandemic.” According to Reuters, the top of the Union parliamentary group has now also accepted significantly higher German EU payments to Brussels.

Merkel also pledged to help countries like Italy, Spain and France. “Germany not only wants to show solidarity, it will also show solidarity,” emphasized the Chancellor. This goes beyond the € 500 billion aid package that the EU finance ministers had already agreed on.

“But that has to be within the framework of today’s contracts,” said Merkel about the debate on Eurobonds. She had already rejected such joint government bonds with joint liability in the CDU Presidium that morning.

Merkel looks at Article 122 in the EU Treaty

According to Merkel, the decisive lever for grants to Italy or Spain could now be Article 122, paragraph 2 in the EU Treaty. As with the agreed short-time work allowance at EU level, this allows bonds to be passed on to countries through guarantees from the Member States.

“I can also imagine such instruments,” said Merkel with reference to the EU switch on Thursday. The advantage for Italy would be, for example, that cheaper EU money would come from such EU bonds than if it itself took out national loans.

According to an EU diplomat, Merkel, France’s President Emmanuel Macron, Italy’s Prime Minister Giuseppe Conte, his Spanish and Dutch colleagues Pedro Sanchez and Mark Rutte, EU Council President Charles Michel and EU Commission President Ursula von der Leyen called on Monday evening to talk to each other prepare on Thursday. At first, no details were known.

Spain wants to end dispute over Eurobonds

Spain had previously announced that it would end the deadlocked dispute over Eurobonds. Prime Minister Sanchez is now thinking of a package worth EUR 1.5 trillion, in which the EU Commission could take out loans secured via the EU budget, the Foreign Ministry said in Madrid. This comes close to Merkel’s ideas.

The background to the debate is that southern European countries such as Italy, Spain and France consider the additional loans already agreed by the EU finance ministers via the ESM euro rescue mechanism and the European Investment Bank (EIB) and the agreed European short-time work allowance to be insufficient.

On Friday, the European Parliament (EP) had already spoken out for additional aid via the EU budget and secured bonds. “This is the compromise between Italy and the Netherlands,” Daniel Caspary, Chairman of the German EPP group in the EP, said to Reuters.

With such an instrument, Italy would neither have to accept a troika with conditions on the use of funds, as the Netherlands had requested for ESM loans. However, the aid is not unconditional as requested by Italy.

Merkel also emphasized that the corona crisis hit the countries “through no fault of their own”. “This is not the result of any shortcomings in economic policy or other things,” she said in view of the debate in the Netherlands and Italy, for example, to make reform requirements for loans.

She indicated that Germany was even ready to discuss new EU treaties, but added: “But then it takes two or three years. And we will need quick answers to the pandemic. “

More: Corona bonds – Macron and EU Parliament increase pressure on Germany.

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