What Napoleon Bonaparte tried to achieve through force of arms, Emmanuel Macron has managed to achieve through diplomacy and political blackmail: the EU’s money is now being handled by Paris, and German taxpayers will be paying for France’s debts and its social programmes. Emmanuel Macron’s “coronabonds” victory over Angela Merkel will have roughly the same consequences for Germany and those few EU countries that are still maintaining sound fiscal policies as the First World War.
Although the French flag will not be flying over the Brandenburg Gate, the reparations that Germany will effectively be paying France and its allies mean that the situation is more reminiscent of a defeat in an actual war. Credit should be given to Europe’s politicians, however: publicly, everything seems honourable and proper. Under the pretext of fighting the coronavirus, Angela Merkel (after years of fierce opposition) has agreed to the issue of so-called “coronabonds” – debt that the EU as a whole will be responsible for (but essentially Germany and other countries with more or less stable economies), while the money will be spent by France, Italy, Spain, and other EU members with particular ideas on budgetary discipline. The first tranche of “coronabonds” will be worth €500 billion. As pointed out by the BBC, “French President Emmanuel Macron and German Chancellor Angela Merkel agreed that the funds should be provided as grants.”
Translated from “bureaucratese” into harsh economic policy, this should read as follows: the Germans, Dutch, Swedes and Austrians will go into debt and repay the debt, and the money will be given, no strings attached, to countries in the European South that have successfully broken “Iron Angela’s” resistance, probably by threatening that if they didn’t get the money (and with no strings attached!), then the eurozone would simply be destroyed. It cannot be ruled out that this was precisely the threat being hinted at by Emmanuel Macron following the German chancellor’s capitulation, when he stated that the €500 billion was the step (probably the first step) “the euro zone needs to remain united.”
In theory, the debt will be repaid with money from the EU’s joint budget. But, firstly, EU member countries do not contribute equally to this budget and, secondly, if, under the pretext of fighting the coronavirus, Macron and his allies were able to defeat the once unbending Merkel on such a sensitive issue as the creation of a common European debt instrument, and make it so that France, Italy, Spain, and other countries in the European South will pay even less into the budget, while Germany, Austria, Denmark and Holland will pay far more, then it is unquestionably a political operation.
Anticipating the huge scandal that would erupt after her capitulation on what is a matter of principle for German businesses, politicians, and a significant portion of the electorate, the German chancellor was quick to make some important clarifications to the French president’s victorious comments.
She argued that “coronabonds” are a one-time instrument that are necessary because the European Union is facing an unprecedented crisis. British newspaper The Guardian pointed out to its readers that Berlin’s official position presupposes “a strict shelf-life” for the adopted programme, which – in theory, at least – should reassure those opposed to German money being handed out to French beneficiaries. The problem is that these assurances are unlikely to appease anyone.
The European Parliament is already calling for a €2 trillion package (rather than the €500 billion currently anticipated) to “stimulate the economy”, which means there is every chance that Germany and other more or less stable EU countries will be saddled with the kind of additional debt that no one could possibly imagine right now, not even in their wildest dreams. In addition, the Italian prime minister has already tweeted that the €500 billion “grants” are a “first step”. So, chances are that Macron and his sudden allies are going to milk Germany even more.
Paradoxically, the last hope for saving Germany’s money is a union between Austria, Denmark, the Netherlands and Sweden, under the informal leadership of Austrian Chancellor Sebastian Kurz.
As Euronews quite rightly points out, every EU member needs to consent to the “coronabonds”, but not every EU member has done so: “Sebastian Kurz offered a glimpse of the tough negotiations to come, announcing on Twitter that he’s spoken with the Danish, Dutch and Swedish leaders on the proposal and that their ‘position remains unchanged’. ‘We are ready to help most affected countries with loans,’ he said.”
However, despite the fact that the countries who are less than happy about plugging up the holes in France and Italy’s budgets have a de fact right of veto, there is little chance that this courageous “frugal four” will be able to hold out for long against the combined pressure of the rest of the EU, Paris, Berlin, and the European Commission. For those countries that have lost out from being in the eurozone and whose economies are unable to compete with the German economy on the European single market, the coronavirus pandemic is a kind of last chance to force Berlin and its allies to pass on some of the excess profit that the eurozone has brought them. On the other hand, voters in Germany, the Netherlands and Austria could raise reasonable objections to such a redistribution of money at their expense. German citizens will be unable to stop Angela Merkel if she is convinced that saving the eurozone is worth €2 trillion that will ultimately have to come out of the German budget. But, at the next elections, these voters may decide they need politicians who will defend their national interests more fiercely. And it will come as no surprise if a side effect of “treating the coronavirus with debt” is a sharp spike in anti-system populism in many European countries.
Should this happen, then the blame will be placed on either “Russian social media trolls” (as usual) or on “Chinese propaganda efforts” (the current craze). But the real culprits in creating a new wave of political risk for the European Union are the European leaders themselves who have chosen this path.