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One Crisis Too Many: How the Coronavirus Pushed Germany to Shift Course
In her time as chancellor of Germany, Angela Merkel has seen the European Union put to the test by Brexit, a wave of migration, the Greek debt crisis and populism, and still she held to a largely steadfast course.
Then came the coronavirus.
Faced with a tarnishing of her own legacy and a deep recession gutting her own country and its main trading partners, Ms. Merkel this week agreed to break with two longstanding taboos in German policy.
Along with the French president, Emmanuel Macron, Ms. Merkel proposed a 500 billion euro fund to help the European Union member states most ravaged by the virus.
The proposal, which is hardly a done deal, departs from two central elements of German orthodoxy, said Jean Pisani-Ferry, an economist and former French government adviser.
It would allow the transfer of funds from richer countries to those more in need. And it would do so with money borrowed collectively by the European Union as a whole.
It will not be popular in Germany, and it may help populist opponents on the political extremes. But Ms. Merkel, in the twilight of her long political career, has put the interests of the 27-nation union -- which embeds Germany into Europe as much as NATO does -- before her domestic concerns.
Confronted with a pandemic that has cratered Europe's economy, Ms. Merkel and Mr. Macron, who have often found themselves at odds over the years, dragged the rusty Franco-German motor out of the garage and got it running again.
The proposal was a clear recognition of the threat presented by the pandemic, whose full economic carnage has yet to be felt. And it was an attempt to overcome the deepening divisions within the European Union -- between the frugal north and the devastated south, between Brussels and Central European authoritarian governments -- over how to respond.
It also reflected the fact that, with Britain gone, Germany and France -- two very different countries that represent Europe's largest and most powerful economies -- now have more room to assert themselves, if they can only find common ground. When they agree, they normally carry the rest of the member states along with them.
"This crisis tells us something about leadership, and how important the Franco-German engine is, and how bad things can go without that,'' said Nathalie Tocci, an adviser to the European Union and head of Italy's Institute of International Affairs. "The Franco-German relationship epitomizes ultimately what the E.U. is about, crystallizing the arguments of different sides, and if they agree, it creates a critical mass for the others.''
The pandemic appears to have paved the way for that to happen.
"It's been a long time since the French and Germans were able to put forward something substantial,'' said Mr. Pisani-Ferry, who is now with two think tanks, Bruegel in Brussels and the Peterson Institute for International Economics in Washington. "But the virus is a sudden major shock. The point is not about the past, but about what we do now.''
On Monday, Ms. Merkel and Mr. Macron proposed borrowing about $545 billion for a common recovery fund. Its repayment would be the financial responsibility of the entire bloc, but it would primarily benefit the poorer south, which has been hit hardest by the virus.
The proposal will be factored into a plan being drawn up by the European Commission, the bloc's bureaucracy, which is supposed to be finished by May 27.
Caught between poorer southern states hit hardest by the virus, like Italy and Spain, which want European support in terms of grants, and richer northern states that reject collective debt and favor loans instead, the commission had been at an impasse.
Ms. Merkel's defection from the northern camp, even it is just a "one-off" response to the crisis, as she insisted, may help break the logjam.
There will inevitably be further, angry horse-trading before any proposal is finally agreed upon unanimously by member states, but knowledgeable European diplomats believe the final result is now more likely to emphasize grants instead of loans, with any new European debt to be paid off in common sometime after 2027.
[Source: By Steven Erlanger, The New York Times, Brussels, 19May20]
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