The Regional Prefect (ret) Cyrille Schott, Member of the board of EuroDéfense France and the Editor-in-Chief of this magazine, Hartmut Bühl, set out their thoughts on the Franco-German partnership at the service of the European Union.
“I welcome the constructive proposal made by France and Germany. It acknowledges the scope and the size of the economic challenge that Europe faces”, declared Ursula von der Leyen, the President of the European Commission on 18th May 2020. She presented her own recovery plan for Europe on 27th May 2020, including the Franco-German ideas for mutualised debt issuance and striking a balance between grants and loans. The joint proposal put forward by Angela Merkel, the German Chancellor, and Emmanuel Macron, the French President, is designed to pave the way for a new spending package. The joint statement by Richard Ferrand and Wolfgang Schäuble, co-chairs of the Franco-German Parliamentary Assembly, gives further backing to the Merkel-Macron agreement. It is now up to the institutions in Brussels to come up with specific proposals.
The 10 points of Cyrille Schott and Hartmut Bühl
1. The Franco-German “engine” is vitally important for the future of Europe. In spite of the differences in their respective political, economic and legal systems, and the necessity to take into account their public opinions, the two countries have again succeeded in reaching agreement because of their shared European convictions.
2. A fundamental change in the fiscal policy of the European Union (EU): Now that the Franco-German proposals have been put forward, they will of course be debated, but they are unprecedented in that they break with a fundamental budgetary taboo.
3. Raising money through EU loans: Member States have never allowed the EU as such to raise its own loans, despite its high credit rating. If the proposal is adopted, even with restrictions, we might think that in the long run the Union will be able to raise funds from the financial markets as a state.
4. Recovery plan will power the Euro: Europe’s efforts to foster the necessary economic recovery of our countries will be substantial. EU loans would create the EU’s own public debt as well as driving a global Euro bond market, a necessary further step in asserting the international status of the Euro.
5. Repaying EU loans: this would certainly be easier if the Union were to create a fresh set of own resources, like a carbon border tax or a digital tax, independent of Member States’ contributions. These new resources would facilitate the repayment and are already being considered by the Commission.
6. The budgetary scope of the structural funds would be doubled: The allocation criteria of the recovery plan would focus on the countries, the regions and the sectors that have been the hardest hit by the pandemic; the amounts of Commission grants, and not loans, to Member States would more than double the 500 billion already committed by Brussels.
7. Member States reservations are to be overcome: the proposals for spending the funds have raised reservations from Northern European countries like Denmark, The Netherlands and Sweden, as well as Austria. Their reservations focus on whether the funds should be distributed as grants, with no repayment requirements, or as repayable loans and how they should be allocated, with or without conditions. The forthcoming debates will focus on these issues and will probably lead to a compromise.
8. It is essential to avoid a “war” among Member States in view of the social and industrial situation of all countries after the pandemic: millions of jobs are in the balance; there should not be winners and losers from this crisis. Everyone must be a winner! There must be unprecedented solidarity in word and deed in order to relaunch our Union and not let it succumb to street protests and lose our soul.
9. An upheaval of the European institutions, endangered by the decision of the German constitutional court, must be warded off at all costs. The moment is crucial and the Union must, on the contrary, emerge stronger from the current crisis.
10. Solidarity must be at the heart of Europe: the Union has to honour this essential solidarity, cherished by its founding fathers, that focuses on the human being and that must be at the heart of its policy, for the benefit of our countries and the whole world that counts on a strong and liable Europe.