‘A quantum leap’: German MEPs welcome EU debt for recovery plan

Ursula von der Leyen presents the EU recovery plan to the plenary in Strasbourg. [EU Multimedia Center]

Until recently, the German government resisted taking on joint EU debt. Now, Germans are heaping praise on the recovery plan presented by the European Commission on Wednesday (27 May). EURACTIV Germany reports.

A majority of German politicians welcomed the coronavirus recovery plan presented by Commission President Ursula von der Leyen. Much praise came from her own party, although the CDU had been critical of debt mutalisation in the past.

However, the joint Franco-German proposal for a European borrowing programme last week showed “that Germany wants to take on more European political responsibility,” Katja Leikert, chair of the CDU/CSU parliamentary group in the Bundestag, wrote on Wednesday.

This message would be carried into the negotiations on the Multiannual Financial Framework (MFF) during the German EU Presidency from July to December.

European People’s Party leader Manfred Weber said in the European Parliament that, as a Christian Democrat, he does not like the idea of taking on debts in the name of the EU.  Nevertheless, he was pleased: “European solidarity is back.

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European Commission president, Ursula von der Leyen, proposed on Wednesday (27 May) an unprecedented stimulus of €750 billion, mostly through non-refundable grants, with governments having a crucial role in deciding how the money will be spent.

Chair of the Committee on Budgetary Control rejected long repayment periods

For Weber’s party colleague Monika Hohlmeier (CSU), Chair of the Committee on Budgetary Control in the European Parliament, the Commission proposal is a “historic opportunity.”

She was pleased about Berlin’s change of course. “If we are honest, the reconstruction programme is a quantum leap that nobody thought possible a few months ago,” she told reporters in Berlin.

Asked what she thought of the €500 billion in direct grants that the Commission would like to give to hard-hit countries, she said that these too were justified.

The fact that the repayment is scheduled for 30 years, however, caused her to frown.

“We can assume that the high investments will soon result in a strong wave of taxes. The EU should therefore start repaying the loans as quickly and consistently as possible,” she said and warned that direct aid should not be used to pay off member states’ old debts.


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Social Democrats angry at “Frugal Four

Among the Social Democrats, resistance from the “Frugal Four” – Austria, Denmark, Sweden and the Netherlands – to taking on mutual debt is the main source of annoyance.

“The stinginess of Kurz und Co. is a farce by heads of government who want to secure right-wing conservative voters’ votes,” said Joachim Schuster, financial policy spokesman for the SPD parliamentary group in the EU Parliament.

“The Dutch government in particular should be ashamed, as it is now refusing to show solidarity but, through its tax policy, has diverted profits from companies in other countries that lack this income in the current crisis.”

On the part of the Greens, Rasmus Andresen, German member of the Committee on Budgets, praised the Commission’s decision to take on debt with a long repayment period but cautioned that “we are sceptical whether the proposed fund is economically strong enough”.

Andresen is also critical of extending loans through the European Stability Mechanism, as decided by the EU finance ministers in April, because some of the most affected countries might not use them.

Instead, he advocates the highest possible level of direct subsidies, to be financed by additional revenue to the EU budget. He supported the proposal to do this via European digital and carbon border taxes.

Similar words come from party colleague Sven Giegold: “Grants help the crisis countries more than loans. Loans alone would ignite a new debt spiral in Europe.”

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German steel industry demands protective measures

On the liberal side, politicians were not particularly happy. The middle ground of subsidies and loans is “not satisfactory,” FDP politician Moritz Körner, also a member of the Budget Committee, told EURACTIV Germany.

“How the EU’s ban on incurring debt is to be maintained in the long term remains questionable.” The top priority is therefore to use the money to strengthen competitiveness.

Similar signals are coming from German industry. The steel industry fears massive imports from other EU countries and is urging the Commission to tighten protective measures for the industry.

At the same time, the “economic restart and thus one of the core objectives of the recovery plan is threatened,” said the German Steel Federation.

[Edited by Zoran Radosavljevic]

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