Green MEP accuses Germany of ‘setting a bad example’ in its recovery plan

German chancellor candidate Olaf Scholz wants Germany to play a leading role in the EU. [EPA-EFE | Filip Singer]

The draft of Germany’s recovery plan promises that 80% of the EU recovery funds will go to climate protection and digitalisation, well above the EU’s requirements. However, Green MEP Sven Giegold has complained that only a quarter will go to future investments and most of the money is earmarked for old projects.  EURACTIV Germany reports.

This year, EU countries will start receiving money from the recovery fund, financed by joint European bonds. Like all member states, Germany must submit its recovery plan setting out where the money is to go. The first draft went through the cabinet in December.

The Green Party has voiced its opposition to the proposal, stating the majority of the money would be used for debt restructuring. More specifically, it will finance projects that have already been decided and which would have otherwise been paid for through taxes and national debt.

Only about a quarter was actually used for new projects, said Giegold, an MEP on the European Parliament’s Economic affairs Committee.

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German change of heart

Under the terms of the recovery fund, the EU will take on debt together for the first time, and be collectively liable for it to finance economic recovery.

The decisive factor was the change of heart in Germany, which had vehemently opposed any form of joint debt liability following the 2008 financial crisis.

The recovery fund was then decided in July 2020, producing a €750 billion fund, of which €672.5 billion was to go to member states as grants and loans, with the rest going into EU programmes.

States that were hit harder by the crisis receive more. Germany is expected to receive €23.6 billion as a non-repayable grant.

Governments submit their recovery plans to the Commission for approval, and they must meet specific requirements. For example, at least 20% must go toward digitalisation and 37% toward climate protection.

Can EU economies grow enough to repay the increasing debt?

The COVID pandemic is putting pressure on the sustainability of some European economies, prompting some to argue that economic growth and monetary support from the European Central Bank will not be sufficient and that public debt should be renegotiated.

“Formally correct, politically bad”

The draft German recovery plan meets both objectives: digitalisation and climate protection are each earmarked to receive 40%.

But the majority of the projects had already been decided, Giegold said.

He told EURACTIV that, formally, Germany was proceeding correctly. The rules of the recovery fund allow retroactive financing of national programmes that have already been approved – going as far back as February 2020.

The German projects that have been approved come from an economic stimulus package the government presented in June and totals €130 billion.

“Formally, everything is correct, but politically it is bad,” Giegold said. Germany is “setting a bad example,” because “we don’t want member states to use [the recovery fund] to pay off old debts, but to make a leap forward.”

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“Making Germany fit for the future”

It is possible, however, that the government had already expected to finance some of the programmes through the EU reconstruction fund when it decided on the economic recovery plan, even though it was not communicated at the time.

The Germany finance ministry says that it had done everything right.

“With 80% of the funds earmarked for climate protection and digitalisation, the German recovery plan not only meets the requirements of the EU recovery fund, but actually goes well beyond them,” a ministry spokesperson told EURACTIV Germany.

“In this way, we are making Germany fit for the future.”

[Edited by Benjamin Fox]

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