Germany First (II)

The EU in Peril

The complete lack of EU support in the fight against the Covid-19 pandemic and the ongoing German blockade of a possible issuance of "corona bonds" [1] have provoked widespread indignation at Berlin and Brussels in France, Spain but, above all, in Italy. Even traditionally pro-EU circles have begun to turn their backs. As the Italian daily La Repubblica noted, "the virus has shattered the hypocrisies, all that remains is rhetoric."[2] According to an opinion poll conducted on March 12-13, 88 percent of Italians feel that Europe is failing to support Italy in the crisis, while only 4 percent believe that it is doing enough. And 67 percent of Italians regard EU membership as a disadvantage, up from 47 percent in November 2018.[3] "If we do not find a common answer to this crisis, the European project is in danger," warned EU Economic and Monetary Affairs Commissioner Paolo Gentiloni in the German press on the weekend. This is not only a struggle against the pandemic, "in this crisis, we must also save the EU."[4]

"That is the Disunion"

The reactions in Germany are mixed. Foreign Minister Heiko Maas is sitting on the fence. "That's just how it is, each country assumes its own responsibility" on how to deal with the crisis, the minister declared. "Urgent measures were taken everywhere at the local or national level."[5] But then the second phase started, "in which we help each other." In fact, to counter criticism, Berlin is now treating more than 100 Covid-19 patients from France and Italy in German hospitals' intensive care units, according to official information. This is respected by everyone, Maas claims. "Europe is pronounced dead, at the outset of every crisis." In the end, one can always hear "without Europe, things would have turned out much worse." Others have begun to take Southern Europe's widespread indignation a bit more seriously. "When the corona crisis really became serious, the EU played no role," admits Norbert Röttgen, Chairman of the Bundestag's Foreign Affairs Committee. "If that continues, it will be engraved in the Europeans' memory. They will ask, is the EU really all that important?"[6] The CDU politician notes, "Italians, Spaniards as well the French are deeply disappointed with Germany." We could ask "if that is justified." "But what counts is the perception," Röttgen concludes. "We must recognize: That is the disunion."

Winner and Losers

For Germany, billions are at stake in the attempts to overcome the EU's crisis. A study published last year by the Bertelsmann Foundation indicated that, thanks to the EU's single market, Germany has €86 billion more in income annually - more than any other country in the Union. That amounts to a single market annual per capita income of €1,024 in Germany, €589 in Spain and €401 in Greece.[7] Germany is also the primary beneficiary of the single currency. The Centre for European Policy (cep), located in Freiburg, also published its research findings last year, showing that Germany's Gross Domestic Product (GDP) in 2017 would have been €280 billion less without the euro. In all, since the euro had been introduced, up to and including 2017, the effect of the common currency has harvested Germany an additional €1.9 trillion. France and Italy, on the other hand, lost through the introduction of the euro - France around €3.6 trillion and Italy more than €4.3 trillion.[8] In 2017 - had the euro not have been introduced - France would have had an additional €374 billion in its GDP, and Italy, even €530 billion more.

An Aid Program for the South

Therefore, a growing number of voices within the German establishment are demanding that concessions be made to some of the demands being raised by Italy and other countries in Southern Europe. However, prominent forces still block the issuance of "corona bonds." "To reduce the necessary debate to a single instrument is not very effective," declared Wolfgang Schäuble, President of the German Bundestag. Even in a crisis, everyone must bare the consequences of his decisions: "that would no longer be the case with joint debts." "Corona bonds" are therefore to be rejected.[9] Others have begun to see this as too risky. "Countries, such as Italy and Spain would never forget in a hundred years, if Europe and we, in particular, would forsake them now," former foreign ministers, Joseph Fischer and Sigmar Gabriel wrote in an appeal published yesterday, "and that is exactly what we are currently doing."[10] At the same time, "our country ... [is] the biggest economic and financial winner" of the EU: "We even made money on the financial crisis in Greece."[11] To save the EU, countries such as Italy and Spain must be provided three things: first "emergency humanitarian medical assistance," then "intermediately, long-term European credit support ... to stabilize their domestic real economies," and finally, a "long-term innovation promotion program to guarantee them an economic and social future." Germany would be "well advised to participate immediately in this kind of aid program at the European level."

A "Marshall Plan" for the EU

In fact, initial measures are already in the making. Berlin and the President of the EU Commission, Ursula von der Leyen, are attempting - in spite of persistent protests, especially from Rome and Madrid - to circumvent issuing "Corona bonds," and instead use flamboyant terminology such as "Marshall Plan" as a distraction. Commission President von der Leyen announced that the EU budget should be seen as a sort of "Marshall Plan" to confront the EU's economic crisis that will follow.[12] Von der Leyen is also raising the issue of "European short-time work schemes" of up a €100 billion. Presumably, it would benefit all EU countries, including Germany, if there would be no special assistance provided to the particularly crisis-ridden south. The same is being said about a "pan-European credit guarantee fund," with a volume of up to €50 billion, that Germany*s Minister of Finance Olaf Scholz wants to provide through the European Investment Bank, to ensure security for bank loans to small and medium-sized enterprises.[13] Scholz wants to provide money from the European Stability Mechanism (ESM) Euro Crisis Fund particularly for countries such as Italy and Spain. This has already been refused by Rome, because ESM funds are provided with foreign-imposed economic policy obligations and renewed monitoring by a "Troika." Berlin still insists on imposing it, to avoid any form of "Corona bonds" - until now, at any costs.

[1] See also Wer die Regeln setzt.

[2]Stefano Folli: Coronavirus, c'era una volta l'Europa. rep.repubblica.it 15.03.2020. See also Die Solidarität der EU (II).

[3] Teresa Coratella: Whatever it takes: Italy and the Covid-19 crisis. ecfr.eu 18.03.2020.

[4] Tobias Kaiser: "Ich denke, Deutschland kann das akzeptieren". welt.de 04.04.2020.

[5], [6] Johannes Leithäuser: "Legen Sie erst Ihre eigene Maske an". Frankfurter Allgemeine Zeitung 04.04.2020.

[7] Giordano Mion, Dominic Ponattu: Ökonomische Effekte des EU-Binnenmarktes in Europas Ländern und Regionen. Herausgegeben von der Bertelsmann Stiftung. Gütersloh 2019.

[8] Alessandro Gasparotti, Matthias Kullas: 20 Jahre Euro: Verlierer und Gewinner. Eine empirische Untersuchung. cepStudie. Freiburg, Februar 2019. See also Die Wahl der Wirtschaft.

[9] EU-Kommissar Gentiloni für gemeinsame Anleihen. welt.de 04.04.2020.

[10] Joschka Fischer, Sigmar Gabriel: In der Corona-Krise geht es um Leben und Tod - auch für Europa! tagesspiegel.de 05.04.2020.

[11] See also Wer hat, dem wird gegeben.

[12] Beatriz Rios: Von der Leyen: EU budget should be the Marshall plan we lay out together. euractiv.com 02.04.2020.

[13] EU-Kompromiss zu Corona-Hilfen in Sicht. Frankfurter Allgemeine Zeitung 03.04.2020.