Constantin Eckner

Why Germany is reluctant to bail out Italy

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The European Union has done it again. Last Thursday, member states agreed on an aid package of more than half a trillion euros (£436bn). A good portion of that money will be used to revitalise the economies in Italy and Spain, the two European countries that have suffered the most deaths due to the virus so far. But the recovery fund was only made possible because the agreement avoided an explicit mention of jointly-issued debt, which has been anathema to Germany, Finland or the Netherlands. ‘It is impossible that debt could be communitised’, Angela Merkel said after the package was announced. The German chancellor and other state leaders oppose ‘coronabonds’, arguing that such a concept would punish those countries, like Germany, that have built up reserves during good times.

But that view isn’t universal among European leaders. ‘If Europe does not rise to this unprecedented challenge, the whole European structure loses its raison d’être for the people,’ said Italian prime minister Giuseppe Conte in March. What Conte envisions as raison d’être is financial solidarity and especially support of weaker member states, not only during an extraordinary crisis but in general. The strong economies are supposed to fund the weaker ones, creating a level playing field within the EU.

That’s not what the strong economies have in mind. The strongest of them all, Germany, may praise the EU as a peace project and geopolitical player with the potential to stand up to superpowers, but more importantly it views the EU as a single market for its export-oriented companies and industries in need of cheap labour. The reason German manufacturers have been thriving is partly due to the export of goods to EU member states; the reason the German healthcare system works well on a relatively low budget is partly due to the immigration of eastern European doctors.

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