Joint European debt, to combat an unprecedented crisis? That was the decision the EU took during the COVID-19 crisis in 2020. Back then, Germany, in the form of Chancellor Angela Merkel, made a sharp U-turn on fiscal policy. Germany had always categorically rejected joint European debt. But the overwhelming scale of the crisis, which plunged the whole of Europe into a dramatic downturn, forced a rethink.
The EU's COVID-19 recovery fund is set to distribute a total of €750 billion ($750 billion) in grants and cheap loans. It is far from clear, though, whether this will achieve the desired effect, or whether the debt will ever be repaid, as Merkel and Co. promised.
Joint debt, guaranteed primarily by the most economically powerful member states, was to be an absolute exception.
Free pass from Berlin
Until today, that is. At the EU finance ministers' meeting in Luxembourg, more and more member states, as well as two EU commissioners, called for "European solidarity," i.e., more debt at the EU level.
There is increasing fear, even panic, that the massive energy crisis caused by Russia could force industrial production in Europe into meltdown. And debt-ridden governments are realizing that they simply do not have the fiscal means to offer companies and electorates in their own countries any relief from soaring prices.
Instead of saving, developing new sources of energy, and preparing their populations for hard times, it is, predictably, more convenient to appeal to Europe, that is to the economically stronger states — above all Germany.
Germany's comparatively inexperienced finance minister, Christian Lindner, has also just given them an excuse to do so. Last Thursday, responding to domestic political needs alongside Chancellor Olaf Scholz and Economics Minister Robert Habeck, Lindner announced a €200 billion relief package for the German economy.
Contrary to all that he had sworn in the past, Lindner agreed, as part of Germany's ruling coalition, to take on more debt in order to steer Germany through the energy crisis. This "double whammy," as Chancellor Scholz calls it in his comic-book language, has naturally prompted feelings of covetousness among Germany's European neighbors. Instead of putting the money toward this "Made in Germany" rescue package — it is still unclear how it will actually work — Germany could have used it to help the EU they say.
Orban and Meloni, of all people
Could it? Should it? No! The energy crisis cannot be compared with the COVID-19 crisis. It goes much deeper, will be much more expensive, and is not about to go away. COVID-19 simply created a shortfall in demand; at some point it will be over.
Extremely expensive energy scarcity, however, will continue long after Vladimir Putin has — hopefully — lost his war. And, unlike in the COVID-19 crisis, neither the state nor Europe will be able to protect people from the drastic consequences of the recession Putin has triggered. It is going to cost us, in terms of prosperity and living standards.
EU finance ministers promised to coordinate rescue measures and not subsidize their own industries in a way that would damage competition. There is little sign of this actually happening. Confronted with this mega-crisis, everyone is looking out for themselves.
It's pretty brazen of Giorgia Meloni, Italy's far-right prime-minister-in-waiting, and Hungary's anti-EU autocrat Viktor Orban to now claim European — read German — money. Italy announced rescue packages of its own long ago, and is already collecting €200 billion from the COVID-19 recovery fund. Meanwhile, Hungary is still getting cheap gas and oil from Russia while continuing to rage against sanctions. In this crisis, Putin's friend Viktor Orban doesn't deserve a single European cent!
The economic crisis will come to a head over the coming months if Russia's nonsensical war against Ukraine continues. Pressure will grow on the German finance minister to execute another U-turn and also agree to European debt, with unforeseeable consequences.
The EU has questions to answer
But first, European governments should instead focus on buying energy collectively, not outbidding each other in markets gone wild. They should also join forces to do all they can to skim off European corporations' excess profits and redistribute the proceeds. That would be a good start to European solidarity.
In addition, European leaders must finally grapple with how they would handle a gas or electricity shortage within the borderless single market. What happens if Germany, for instance, a gas transit country, receives too little gas to keep supplying its neighbors?
Such concrete questions of European solidarity demand that politicians now find real answers. Simply calling on Germany to act as paymaster is no help at all.
This article has been translated from German.