Paul Taylor, a contributing editor at POLITICO, writes the “Europe At Large” column.
PARIS — She did it!
In the twilight of her chancellorship, Angela Merkel has secured her place in the pantheon of European statesmanship by agreeing to common EU borrowing to help the countries hardest hit by the coronavirus rebuild their economies.
In so doing, she has jumped over the shadow of tight-fisted German conservatism, faced down the high priests of fiscal and monetary orthodoxy in Frankfurt and Karlsruhe, and finally practiced the mantra she preached in the 2008-2015 financial crisis: that “if the euro fails, Europe fails.”
The German chancellor’s agreement with French President Emmanuel Macron to allow the European Commission to raise €500 billion in debt to distribute in grants to stricken member countries is by any definition a landmark moment.
I bet the Dutch and their frugal fraternity will fold rather than die in a ditch to prevent European solidarity.
We commentators who earn a living skewering the myriad shortcomings, pettinesses and frustrations of European integration as practiced by the Brussels institutions and the now 27 member countries should take at least a minute to applaud a historic breakthrough when one occurs.
To be sure, it’s not a European Union agreement yet, just a Franco-German proposal.
There is plenty of fine print to be added, plenty of Dutch, Austrian, Swedish and Finnish resistance to be overcome, and plenty of predictable Polish and Hungarian objections to allowing coronavirus-stricken countries to get their snouts in the trough ahead of poorer Central European cousins to be assuaged.
Merkel is also bound to face a backlash at home among some of her own conservative supporters — including perhaps some of the candidates to succeed her — as well as from the nationalist, Euroskeptic far right. The ayatollahs of austerity are already denouncing an immoral, inflationary “transfer union through the back door.”
Perfectionists will argue, not without cause, that even €500 billion may pack too small a macroeconomic punch, given the massive depression the COVID-19 lockdown will bequeath to the European economy. But as always, it’s better to start with what is possible now than to demand the politically impossible immediately.
So, let’s savor this historic moment.
I bet the Dutch and their frugal fraternity will fold rather than die in a ditch to prevent European solidarity. Dutch Prime Minister Mark Rutte and Austrian Chancellor Sebastian Kurz could afford to grandstand noisily against EU generosity as long as they knew Germany was behind them. When the tide turns in Berlin, people will soon see who was swimming naked.
The Poles and Hungarians may be a bit harder to manage, given current confrontations with Brussels over their defiance of EU norms on the rule of law, the independence of the judiciary and the conduct of democracy.
But since Warsaw and Budapest expect to be among the greatest beneficiaries of the next long-term EU budget, it’s not in their interest to block agreement. And if they fight too hard, the French and Germans could always go outside the EU treaties and create a special purpose vehicle to fund COVID recovery in southern Europe, leaving the Central European dissidents high and dry.
The frugals and the Central Europeans made a wrong bet on Germany hanging tough. They are in a weaker position for having misread the strength of the Franco-German alliance in times of acute crisis.
So why has Merkel done this now, after 15 cautious years in office when she became notorious for a policy of small steps which critics rightly branded too little, too late? Even at the height of her power, the chancellor often argued that she didn’t have the domestic authority to take the bolder measures that others — from Nicolas Sarkozy to Barack Obama or Jean-Claude Juncker — urged on her.
First, her sure-handed management of the coronavirus crisis has given her a massive new injection of political capital, with a stratospheric domestic approval ratings, which she can afford to spend in her final year or so in office. She has nothing much to lose. Her Social Democratic coalition partners, and the Greens opposition party, are likely to back her decision.
French President Emmanuel Macron listens to Merkel during the videoconference Monday afternoon | Pool photo by François Mori/AFP via Getty Images
Second, the coronavirus is such a different challenge from the eurozone debt crisis, in that the “moral hazard” argument for avoiding rewarding bad behavior simply doesn’t apply. This is not about bailing out a country that has lied about its statistics and run unsustainable fiscal policies, as Greece had in 2009.
As Mario Monti, the former Italian prime minister, put it when Italy was forced into an economically catastrophic lockdown: “This is not about la dolce vita [the good life], it’s about la vita — about life itself.”
Third, Merkel’s hand may paradoxically have been forced by the Federal Constitutional Court, which last week challenged the legality of the European Central Bank’s sovereign bond-buying program.
By giving the ECB three months to justify the “proportionality” of its policy, the Constitutional Court opened a latent constitutional crisis within the EU on top of all the other pressures bearing down on the bloc.
In appearing to challenge the supremacy of EU treaty law, and of the Court of Justice of the European Union as its sole arbiter, the Constitutional Court lobbed a hand grenade into the coronavirus crisis which, if not defused, could have undermined confidence in the survival of the euro and of the EU itself.
Berlin was under pressure act to shore up confidence and demonstrate that it would not let the red-robed judges in Karlsruhe derail European monetary solidarity. Merkel could have muddled through, as she so often has done, by sending the court a justification of the “proportionality” of the ECB. The dogs would have continued to bark, but the caravan would have limped on its way.
Merkel may just have set Europe on the road to the moral high ground as a model of interdependence and solidarity.
Instead, she decided to double down and do exactly what successive presidents of the ECB have demanded of EU governments — and especially of the bloc’s biggest and most powerful economy: use fiscal policy as well as monetary policy to fight the crisis.
In doing so, Merkel has finally delivered a German answer for which Macron has been waiting since his 2017 Sorbonne speech, when he called for a stronger, more sovereign EU.
History doesn’t often offer second chances, so we should be doubly grateful that Merkel has seized this one to lay a new foundation for deeper European solidarity.
In crossing the Rubicon of common borrowing, she has taken a giant political risk at home — one that is almost certain to land the government back in court in Karlsruhe in a year or two’s time.
But she has earned her place in the lineage of postwar leaders, from Konrad Adenauer to Willy Brandt, Helmut Schmidt and Helmut Kohl, who understood that securing a vibrant, stable Europe based on a social market economy is Germany’s supreme national interest.
As the coronavirus crisis drives the United States, China and Russia to intensify potentially fateful power and propaganda rivalries, Merkel may just have set Europe on the road to the moral high ground as a model of interdependence and solidarity.