Ethe signals from the EU Commission in the past few days have not been unambiguous. In a guest article published in the FAZ on Tuesday, Thierry Breton and Paolo Gentiloni, the commissioners for the internal market and for the economy, brought up a new fund that is to be financed by EU debt. “Let’s be inspired by the ‘Sure’ program created during the Corona crisis to help Europeans in the current crisis,” the article said quite unequivocally.
Already on Tuesday, at least Gentiloni did not want that to be understood as a concrete proposal – and above all not as criticism of Germany. The Berlin 200 billion euro defense against the consequences of the energy crisis was the reason for the initiative of the commissioners. The “double boom” puts other, less financially strong EU states at a disadvantage and threatens to distort competition in the internal market, the article said.
At first, the EU Commission was told that the guest contribution only reflected the opinion of the two commissioners. Valdis Dombrovskis, the agency’s vice president, said he wasn’t too sympathetic to the idea. In the meantime, however, it has become apparent that the contribution may very well have been a deliberately launched test balloon. Already on Wednesday, the President of the EU Commission, Ursula von der Leyen, followed up. In the morning she campaigned in the EU Parliament for additional funds for “Repower EU”, with which the EU wants to make itself independent of Russian energy supplies.
“Transition to Energy Independence”
In the evening she wrote in a letter to the heads of state and government in preparation for the special summit this Friday in Prague: “I believe that we must increase investments in order to accelerate the transition to energy independence,” she wrote. With “Repower EU” the EU has taken the first steps towards solidarity. “But that will not be enough to secure the necessary reforms and investments in all states. The Commission will seek complementary sources of funding to increase clout.”
Von der Leyen deliberately left open what that meant in concrete terms. First, the EU heads of state and government should discuss it, it was said afterwards. Then the Commission will see further. That is probably an understatement, because the EU authority is apparently examining specifically whether to do exactly what Breton and Gentiloni suggested: it wants to take out loans based on the EU short-time work program Sure, so that they can then pass them on to the member states.
Scholz defends the “double boom”
In contrast to the recovery fund, which was also decided during the Corona crisis and also contains grants, the EU states have to repay these loans. But it is still EU debt, and it has a redistribution effect: the EU, whose top rating is derived from the high creditworthiness of the less indebted countries, supports the more indebted countries with a less good rating.
Officially, the EU finance ministers did not want to further fuel this discussion on Tuesday, the German minister Christian Lindner (FDP) openly rejected the plans. Whether the entire traffic light coalition sees it that way is an open question. Like Lindner before him, Chancellor Olaf Scholz (SPD) defended the double boom in Prague on Thursday, arguing that other countries support their companies and citizens in a similar way and (extrapolated to the respective population) to a similar extent. This claim is very controversial in Brussels. What is certain is that the German 200 billion package has provided the advocates of new EU debt with a downright template.
In any case, France’s Finance Minister Bruno Le Maire has also declared his support for the Sure plans. Accordingly, diplomats from those countries that are traditionally skeptical about EU debt are alarmed. They warn against hasty decisions. “As long as several hundred billion euros from the Corona development fund and other programs have not been accessed, there is no reason for this,” says a high-ranking diplomat.
The EU Commission is trying to sell the approach as the lesser evil. Nobody is talking about (non-repayable) grants to individual states, it says there. On the other hand, some countries asked for credit. Many would not have the money to cushion the immediate consequences of the energy crisis and to finance the necessary investments in pipelines, renewable energy, insulating houses or installing heat pumps. The problem is that states are outbidding each other when buying gas, driving up prices. In this way, the EU will not be able to free itself from its dependence on Russia. Whether the Commission will put the proposal for a new debt fund on the table in the coming weeks will probably depend on the response at the Prague meeting and at the regular summit in Brussels in two weeks’ time.