On Monday 18 May, Germany and France unveiled a joint initiative to set up a €500 billion European Recovery Fund to help the countries and industries hardest hit by the Covid-19 pandemic to recover.
“If France and Germany are giving an impetus, it is certainly something that will help to promote decision-making at the level of the EU27”, German Chancellor Angela Merkel said at a joint online press conference with French President Emmanuel Macron. She stressed the need for Europe to make a “colossal effort” that is “essential and limited in time” to enable the European economy to recover gradually.
This fund, financed by a joint loan from the European Commission, is expected to reach €500 billion, the Franco-German couple estimates. In terms of volume, this is less than the €2 trillion put forward by the European Parliament (see EUROPE 12488/1) or the €1 trillion previously put forward by France (see EUROPE 12483/1). And, as Germany is against it, there will therefore be no mutualisation of debt, with each Member State remaining responsible to the EU budget to the extent of its national contribution.
Mrs Merkel justified this volume of €500 billion by pointing to a total emergency response of €4 trillion, if one also adds the €500 billion of the three safety nets (ESM credit lines, SURE instrument, EIB Guarantee Fund), around €1 trillion for the Multiannual Financial Framework (MFF) 2021-2027 and €2 trillion in national State Aid.
The funds raised in this way would be transferred solely by means of grants to the territories and sectors of activity hit the hardest, in particular via cohesion policy. Mr Macron has thus repeatedly stressed the concept of budgetary “transfers”, which is very controversial in Germany. All funds will have to be “repaid” over a long period of time beyond the next MFF, Merkel said. On Friday, however, a Commission source had reported that some countries still did not accept the provision of grants from the Recovery Fund.
Referring to close work with “Italy, Spain, Portugal and the Netherlands” as well as with the presidents of the European Commission and the European Council, the French president detailed the “four pillars” of the future fund: “ - health protection; - fiscal stimulus; - the ecological transition; - economic sovereignty”.
In the field of health, “Europe must be equipped with very specific skills” such as the creation of stockpiles of masks or tests, common purchasing or production capacities for treatments and vaccines, shared epidemic prevention plans and common methods for registering cases.
For the Franco-German tandem, the European Green Deal must not be called into question, but its implementation must, on the contrary, be accelerated. European aid will have to be accompanied by “commitments on climate, environment and biodiversity”, Mr Macron stressed. In particular, the document supports the raising of the 2030 target for greenhouse gas emission reductions and the introduction of a minimum price for carbon within the ETS.
Drawing lessons from the crisis, Germany and France call for reducing the EU's dependence in strategic sectors through the definition of an “industrial autonomy strategy”. Mr Macron referred to “the production of medicines and the fight against predatory investment from other powers”. Merkel spoke of the importance of reviewing the EU's competition policy, which is too focused on the European market, in order to facilitate the emergence of “European champions”.
The President of the Commission, Ursula von der Leyen, welcomed the “constructive” Franco-German proposal, which, in her view, “recognises the scale of the economic challenge facing Europe and rightly emphasises the need to find a solution that keeps the budget at the heart of its priorities”. According to her, this proposal is in line with the revised proposal for the MFF 2021-2027 and the European Recovery Fund that the Commission will unveil on Wednesday 27 May.
The President of the European Council, Charles Michel, believes that the initiative is “a step in the right direction” and has asked the EU27 to work as soon as possible in a spirit of compromise to reach an agreement as soon as the Commission has made its proposal.
To see the Franco-German initiative in French: https://bit.ly/2ZdJK4D (Original version in French by Mathieu Bion with Lionel Changeur)