Constantin Eckner

Germany’s EU presidency could make or break the union

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Germany’s government had been busy making big plans about all that it wanted to achieve during its EU council presidency which started this week. But then Covid-19 hit, and all these ideas went out the window. Now the talk in Brussels is that Germany’s council presidency has turned into a ‘corona presidency’. But what will this mean for the future of the EU?

Angela Merkel admitted recently that coronavirus has exposed ‘how fragile the European project is’. After the mortal shock of Brexit, the EU tried to show confidence about the future. Brussels tried to punch above its weight, taking on tech giants like Google and Apple. But now the pandemic has transformed the EU from policymaker into big money spender. This means Germany’s council presidency will revolve around two questions: Can the EU cushion the economic effects of the crisis? And can the member states agree on the EU budget for the next seven years? The budget for the entirety of that period will be in the ballpark of 1.1 trillion euros (£1 trillion).

For a long time, Merkel vehemently opposed deficit spending on the European level. She was adamant that the EU could only spend the money it receives from the member states and not take out any loans. But once she gave her okay to the economic recovery fund of 500 billion euros (£450bn) she gave up on her stance. Why? Because much of that cash will be generated through loans. Yet now the floodgates are open, it will be hard to go back again, as the EU is able to incur debts just like every normal country.

Olaf Scholz, Germany’s federal minister for finance, called Merkel’s decision to allow the deficit her ‘Hamilton moment’, referring to the United States’ first secretary of the treasury, Alexander Hamilton who argued that the implied powers of the US constitution provided the legal authority to fund the national debt and to assume states’ debts.

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