France and Germany recently agreed in principle to create a €500 billion three-year fund to relaunch the European economy after the coronavirus crisis. This would be funded by the EU raising funds on financial markets and then using these to invest in those countries and sectors worst-hit by the crisis.
This represents a great leap forward in European integration. In effect, the new recovery fund amounts to an overnight doubling of the EU budget, which normally cannot get into debt, from 1% to 2% of GDP.
This has been achieved thanks to French President Emmanuel Macron’s persistence and German Chancellor Angela Merkel’s . . . desire for a legacy? This is a big about-turn for Merkel, who up to now had always opposed the idea of joint EU debt and had always linked financial support to southern Europe with the most stringent conditions.
For over a decade Merkel had always been tight-fisted with the southern Europeans, even as she wasted hundreds of billions of euros by destroying the German nuclear industry, subsidizing renewable energy boondoggles, and tearing up the EU’s migration rules to welcome 1 million Afro-Islamic migrants into Germany. The latter predictably led to a spike in rape, terrorism, and simple murder against the German people, for which the Chancellor has never been held to account.
Merkel has often claimed she was held back from a more muscular European policy because of the reticence of her “conservative” ruling party, the Christian [sic] Democratic Union. I find that hard to believe given that the CDU has readily accepted Merkel’s destructive atomophobic and oikophobic policies. Actually, I don’t know what goes through the mind of the average CDU apparatchik (from my limited experience: not much).
In practice, this means southern European countries – and potentially others with shaky finances – get to benefit from the EU’s triple AAA debt rating and be able to engage in counter-cyclical spending without facing usurious interest rates. Thus the EU would be delivering on its purported benefits: using scale and north-European credibility for the benefit of all Europeans.
Mind you, the plan needs to be approved by unanimity and for now the “frugal four” – Austria, Finland, the Netherlands, and Sweden – are still opposed. Still, if France and Germany agree, it is likely only a matter of time before something materializes.
As ever, the EU is in a delicate economic position. With the lockdowns, the European economy is going into nosedive. The EU Commission predicts that the eurozone economy will shrink 7.7% in 2020, with Italy, Spain, and Greece all shrinking by almost 10%. The eurozone’s average government debt, which had been painstakingly brought down in recent years, will explode from 86% of GDP in 2019 to 102.7% in 2020.
And consider the debt-to-GDP ratio by country expected for 2020: France and Spain 116%, Portugal 132%, Italy 159%, Greece 196% . . . we note that France is now, macroeconomically, effectively part of southern Europe. By contrast, the Germanic nations of Germany, the Netherlands, and Austria will all have less than 80% debt-to-GDP. The north-south divide in Europe is then more severe than ever, which will make it even more difficult to come to common policies in the eurozone acceptable to all.
The unelected European Central Bank had already injected €750 billion euros into the EU economy (over 6% of GDP). However, the German Constitutional Court (Bundesverfassungsgericht) recently demanded that the ECB justify its actions within three months, in effect rejecting the jurisprudence of the European Court of Justice, which had validated the ECB’s legally highly “creative” policies since 2010.
If the German Court finds the ECB’s policies to be illegal, it could demand that the German central bank, the Bundesbank, ceases to participate in eurozone policies, which would certainly cause the collapse of Europe’s financial house of cards.
This led to an outcry from the usual suspects who consider that the construction of the European Superstate should take precedence over quibblings over the rule of law. The arch-federalist Libération journalist Jean Quatremer excoriated the German Court for “promoting a nationalist and imperial vision of Germany.”
Personally, I cannot be too critical of the Germans in such matters. How many hundreds of thousands of Germans did the Allies incinerate or rape in order to teach them the importance of the rule of law? We can hardly now reproach the Germans for being too attached to this concept.
Legally, this raises the awkward question of Kompetenz-Kompetenz: which court is ultimately competent for deciding competence, the national or the European? While in practice the legal creativity of the European Court has prevailed in the name of the unity of EU law, the fact is that the EU has no constitution as such and hence, in principle, EU actions could be found unconstitutional under national constitutions.
In other news, former EU top diplomat Federica Mogherini has been appointed head of the College of Europe. The College’s alumni and professors complain that she is academically unqualified and that her candidacy, which violates the usual rules of the institutions, is an example of euro-cronyism. If you are ever confused by your authority figures’ empty promises and incomprehensible blather, consider that there is usually a nice big fat paycheck behind it.
What’s more, while remaining implacably hostile to indigenous European nationalisms, the EU has also recently seen fit to tell Iran that it “reiterates its fundamental commitment to the security of Israel.”
It’s cliques and paychecks all the way up.
A majority of my most excellent followers believe that the United States of America will collapse by the year 2050. This is quite possible, though I think later in the twenty-first century is more likely.
In the meantime, the EU is the more rickety construct. A year after losing Great Britain, the bloc’s second-largest economy, the EU will shortly face a new populist wave: “rally-round-the-flag” support for governments is already fraying, the economic devastation will be tremendous and long-lasting, and citizens will demand answers for the coronavirus disaster.
In Italy, to cite perhaps the most important case, support for the national Lega Nord has fallen significantly . . . to the benefit of the even more right-wing Brothers of Italy! – who are now on the verge of overtaking the emasculated faux-populist Five-Star Movement.
We can expect this rickety confederacy of belly-chasing democracies to continue stumbling from one crisis to the next . . .
Hold on to your hats!