German Chancellor Angela Merkel and French President Emmanuel Macron on Monday called for a “strong” and “efficient” coronavirus recovery fund for the European Union, urging a deal to be sealed next month.
The two leaders met for talks at the German government retreat in Meseberg, days before Germany takes on the rotating presidency of the bloc with an economy mired in the worst crisis since World War II.
Berlin’s chairing of the 27-member bloc will be the last with Merkel in charge, and could be the one that defines the legacy of the leader dubbed the “eternal chancellor”.
With the future of the bloc’s relationship with Britain still to be determined, a shift to a lower-carbon world in the balance and deteriorating US-China ties all jostling for attention, there is no shortage of issues to tackle.
But it is the coronavirus pandemic and the economic devastation it has wrought that will concentrate minds.
At talks at the German government retreat in Meseberg, both leaders made a push for 750-billion euro recovery fund proposed by European Commission chief Ursula von der Leyen.
The Franco-German pair had sketched out the backbone of the fund but it has run into opposition from so-called “frugal nations” like the Netherlands and Austria.
Hard-hit southern European countries such as Italy and Spain have called on the EU to loosen its purse strings in the response to the crisis.
“We hope we’ll find a deal (in July), even if the road is still long,” said Merkel.
“What is important for me is that we come out of the debate with a strong instrument. There will of course be changes that must be discussed. But it must remain a fund that… really helps countries that are hardest hit by the crisis.”
Macron had blunt words for the hold-out nations, warning that it would “not be in their interest to see certain members — in particular, members of economic significance in the European economy — affected” by a scuppered deal.
“So it’s solidarity to have this transfer but also it is in their own interests.”
Germany takes on custodianship of the bloc with a strong hand as it has withstood the health emergency better than most other member states.
Once an obstinate champion of budgetary rigour, Merkel’s government has ditched its no-new-debt dogma to throw resources at the crisis.
Its programme to shore up the German economy totals more than one trillion euros in spending, loans and guarantees.
Together with Macron, Merkel last month proposed a massive recovery fund to jumpstart the bloc’s economy.
The fund would offer grants with no repayment obligation to countries hardest hit by the pandemic, a major policy U-turn for Berlin.
With an eye on the devastating blow taken by Spain or Italy, Merkel had said that it was “imperative that Germany not only thinks of itself but is prepared for an extraordinary act of solidarity”.
On Monday, she noted that perhaps sceptical nations could be placated as long as beneficiary nations took action at home to improve their economy.
“What is very important for many that are still sceptical is the wish that we all come out of the crisis strong,” she said.
“That means that the work with a financial plan for Europe and a recovery fund alone won’t be enough, but that everyone looks at home how they make themselves resistant for the future.”
Observers have said that they believe Berlin will ram through an accord.
An EU diplomat agreed, saying: “On the recovery fund, I expect Germany to dictate the whole process. Merkel is holding all the cards and (EU Council chief) Charles Michel will follow that.
“She also wants to get Brexit out of the way and she will always go for the deal as she wants to keep the West together. The third leg will be restoring ties with US after the election there.”
Merkel, who has ruled out running for a fifth term next year, will not have much time.
Brexit talks will have to be done by the year’s end, and in November the focus will be on whether US President Donald Trump wins reelection.
What is clear is that Merkel’s fingerprints will be all over the EU’s roadmap.
“This will be a very Merkel presidency, her swan song,” said the EU diplomat, adding that she would be using it “to craft her legacy”.