Luxembourg The 200 billion euro relief package Federal government for the German economy meets with criticism from the EU partners. Dissatisfaction with the generous aid for German companies extends from Budapest to Paris. At the same time, there are calls for a new European solidarity fund.
France’s finance minister Bruno Le Maire warned on Monday that the eurozone could fragment. Of course, each state can announce its own measures, but a common European strategy is needed, he said before the Eurogroup meeting in Luxembourg: “The more coordinated this strategy is, the better for all of us.”
In doing so, he indirectly repeated the criticism that his compatriot and EU Internal Market Commissioner Thierry Breton had already formulated on Friday evening. “While Germany it can afford to borrow EUR 200 billion on the financial markets, other Member States cannot,” Breton had tweeted. “We urgently need to think about how to give Member States that don’t have such fiscal space the ability to support their businesses.”
In Budapest, the Hungarian Prime Minister lined up Victor Orban with the critics, even if his country is not in the euro zone. “It hit like a bomb when Germany announced that it would help its companies with hundreds of billions of euros,” he said at a press conference on Monday, according to the Financial Times.
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The sanctions policy against Russia affects all European countries, but there is no common fund to compensate for the damage. That leads to the current situation: “The rich help their companies with enormous sums of money, while the poor cannot do this.” And Orban added: This is the “beginning of the EU’s self-mutilation”.
In fact, economists also see the danger that the crisis will exacerbate the differences between the euro countries. The International Monetary Fund (IMF) therefore recently proposed setting up a European stability fund based on the model of the Corona recovery fund. This is popular in some southern European countries, but Germany and other northern European countries are strictly opposed to renewed joint borrowing.
The Eurogroup has been discussing for months how to economic policy coordinate better in order to prevent the states from drifting apart. With the “double boom”, the federal government is now giving its critics a through ball. Not only are the new billions in debt outsourced to a questionable shadow budget. They also appear to be flouting eurozone countries’ agreement to exercise fiscal prudence so as not to hamper the European Central Bank’s (ECB) fight against inflation. In a joint statement on Monday, the Eurogroup reaffirmed this goal.
EU Commission: Don’t help with the watering can
A clear warning also came from the EU Commission. Your recommendation is to provide targeted and temporary help and to coordinate the aid, said Commission Vice President Valdis Dombrovskis. The states could not continue to spend money according to the watering can principle: “We have to make sure that our measures do not ECB– Running counter to the 2% inflation target.”
Federal Minister of Finance Christian Lindner (FDP) found itself on the defensive. He defended the German crisis package as “reasonable” given the size of the German economy. The vast majority would not have noticed that the 200 billion euros should last until 2024 and ideally not be called up in full, he said. The package is “not oversized”.
Lindner also denied that he was thereby fueling inflation. “Germany is not launching an economic stimulus package, Germany is not stimulating demand,” he said. You only dampen “ruinous price peaks”. “We remain neutral on fiscal policy stance.”
Nevertheless, with the relief package he is fueling the debate about solidarity and joint debts in the EU again. Even in their own coalition, desires are being raised again. The spokesman for the German Greens in the European Parliament, Rasmus Andresen, immediately called for “further coordinated and joint programs to prevent further economic drifting apart within the EU”. As a concrete proposal, he named an energy investment fund based on the model of the Corona reconstruction fund.
Currency Commissioner Paolo Gentiloni also emphasized that the current crisis shows parallels to the corona crisis. “We must avoid fragmentation of the eurozone,” he said. However, this is not the moment to blame one country or the other. Instead, the moment has come for more solidarity.