The EU countries will have to go into debt dramatically

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The EU countries will have to go into debt dramatically





© Martti Kainulainen / dpa
Olaf Scholz, Federal Minister of Finance, at the meeting of economics and finance ministers


The EU finance ministers’ response to the dramatic corona pandemic is a small-scale technocratic one. The aid package will not prevent the economy from going steeply downhill.

The EU countries will have to go into debt dramatically

What is particularly striking about the European rescue package that has still been adopted against the consequences of Corona is that it is structurally very similar to the German one. There is a program for short-time work, corporate loans and government loans; a total of 500 billion euros. If Olaf Scholz, the German Federal Minister of Finance, now speaks of a great success, that may well be true – for himself. Things are different for Europe.

What is good for the Federal Republic cannot be bad for its European neighbors. According to this motto, Scholz fought for the German plans against the economic slump to be transferred to Europe in miniature. Similar to the German development bank KfW, the European Investment Bank should be able to provide more loans to companies. The European Commission has launched the Sure short-time work program to keep people in jobs. The ESM Euro Rescue Fund is designed to help countries that are experiencing financial hardship unbureaucratically.

The signal is ambivalent. Yes, it is undoubtedly positive that, as in previous crises, ministers have gathered together and put together a common financial package. They show that even in times when everyone is keeping their distance and old walls are being raised, not to mention resentment, something common can be achieved in Europe. You create what is still missing during migration – that everyone agrees on a compromise.

The downside is that the ministers’ response to the dramatic corona pandemic is a small-scale technocratic, not a political one. Well, that was also the case in earlier years – and it always went well. That’s right, on the one hand. On the other hand, everyone agrees that the crisis caused by the virus is the greatest challenge in the history of Europe; even the Chancellor sees it that way.

However, the finance ministers neglected the opportunity to negotiate an adequate rescue concept. Your package will not prevent you from going downhill economically. Germany has so far planned almost 1200 billion euros in grants and loans to alleviate the crisis. For all of Europe with its 460 million inhabitants, there should be 500 billion euros. The main burden clearly lies with the nation states.

This gives rise to the real problem that ministers are closing their eyes to. The EU countries will have to go into debt dramatically. And thus drift further apart. If model pupil Germany borrows massively new debts today, the total amount of liabilities is still only around two thirds of what Italy is already putting off today. But if Rome and Madrid have such large additional debts, and they will have to, they will approach Greece. The credit aids that have been adopted further promote this effect.

The true message of European finance ministers is therefore between the lines. Olaf Scholz and his colleagues have placed the fate of Europe in the hands of the European Central Bank. In the end, it will have to buy up the government bonds and honor its big promise to save the euro – whatever it may cost.

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