Opinion: Franco-German Covid-19 bailout could secure EU's future

Under this plan, the European Commission could borrow money on capital markets on behalf of the 27 EU member states against the security of the union’s next seven-year budget, to be paid back sometime after 2027. But it brings the euro zone closer to a “fiscal union,” and will generate investment in green technologies and research, which are top strategic priorities. Underscoring the risks to the EU, Macron emphasized the need for “financial transfers andsolidarity, if only so that Europe holds on,” in an interview with the Financial Times in April (paywall). Adding to the pressure, on May 5, in a courtroom in the German city of Karlsruhe, the judges of the Constitutional Court ruled in a case first filed four years ago that the European Central Bank’s public assets purchases program was outside its mandate. These types of ECB programs have been the glue that’s kept the euro zone together, by making sure that smaller Europeancountries are able to get access to funding and avoid default. Alongside Austria, Sweden, the Netherlands, and Denmark—a group of fiscally conservative countries known as “the frugals”—Germany neverwanted to be on the hook for southern European overspending. The “frugals,” led by Austrian chancellor Sebastian Kurz and Dutch prime minister Mark Rutte, favor issuing loans, not grants, and have committed to presenting acounter-proposal to the Franco-German initiative in the coming days. “The whole beauty of the Franco-German duo was that they are very different, especially on economic policy, but when they found a compromise, it would work for most of Europe with some tweaks here and there.” Since the recovery fund is pegged to the 2021-2027 budget, which isstill being negotiated and requires unanimous consent, a country could break ranks and derail the project. Gallery: Coronavirus inspires world graffiti (USA Today) Still, Luis Garicano, a European parliamentarian from Spain and vice president of the Renew Europe group, worries about the proposal getting watered down in negotiations with 25 other member states. Even this proposal could boost support for far-right parties, according to ECFR’s Hackenbroich, because it comes with conditions—notably “a clear commitment from member states to follow sound economic policies and an ambitious reform agenda.” And that,he said, could “remind people…[of] the euro crisis, having the EU tell them how to save money.” There are still some questions surrounding the recovery fund, especially how the loans will be paid back and how the money will be distributed. That’s in line with the goals the EU set out for itself before thepandemic hit,including the European Green New Deal, which aims to make Europe carbon-neutral by 2050. “I feel substantially more optimistic about the prospects of Europe” because of this proposal, said the Spanish MEP Garicano, who argues that “if Macron and Merkel manage to get this plan through, it will have changed completely the narrative of Europe’s role in this crisis.” “I think this is something we will be proud of,” he said.