One of the most difficult tasks of officials and politicians in Brussels is to distinguish between the signal and the noise. If you check the European media over the past week, you get the impression that we are on the eve of a new euro crisis. A lot of noise was made. In the southern member states and within the European Commission people shouted bloody murder about the announced German support package of 200 billion euros to compensate citizens and companies for the high energy prices. The Dutch contribution also had to suffer.
Financially weaker Member States can no longer afford such compensation, resulting in a fragmentation of the internal market and fragmentation of the eurozone. The only solution, it became increasingly louder, is a new, large European emergency fund, perhaps not immediately a new Covid Recovery Fund (RRF), but at the very least a new loan instrument (SURE).
About the author
Sandrino Smeets is affiliated with Radboud University Nijmegen and conducts research into the crisis negotiations in the European Union. In October he is a guest columnist for de Volkskrant, which invites someone every month to publish a column four to five times on volkskrant.nl.
It is now common for such alarmist calls to be accompanied by mud-throwing. There was again the rich, miserly North, which showed too little solidarity with the poorer, asymmetrically affected South. During the euro crisis, people in Brussels still somewhat uncomfortably looked away from Greek posters that compared Chancellor Angela Merkel to Adolf Hitler.
War debt
During the corona crisis, a group of Italian mayors very quickly made a comparison between the cancellation of the German war debt in 1953 and the need for Germany to support Italy financially now. Spanish Prime Minister Pedro Sánchez and Portuguese Prime Minister António Costa were genuinely shocked at the ‘abhorrent’ attitude of the Netherlands.
This time it was the normally so balanced Prime Minister Mario Draghi who lashed out at Germany and the Netherlands with unprecedented fierceness. It was simply unfair. There were even threats to block gas transit through Italy to Germany. Polish Prime Minister Mateusz Morawiecki spoke of German selfishness. According to the French European Commissioner Thierry Breton (Internal Market) and the Italian Commissioner Paolo Gentiloni (Economics), Germany broke the fundamental rules of the game in Europe.
In The Hague, the storm was already lingering. Germany hastened to say that countries like France and Italy have also taken similar support measures, and that the Dutch package was even more generous. So much for the noise.
Inflation
The signal, meanwhile, seemed to come from the Eurogroup meeting on 3 October. This signal was: there is no reason to panic for the time being. Inflation remains the main concern, but in general the Member States – not just Germany and the Netherlands – are in good shape. Finance ministers agreed that broad support packages are not sustainable in the longer term, but for now this was something Member States could afford. Germany had been especially clumsy in communicating.
It was pointed out in detail from the Commission that Breton and Gentiloni had spoken in a personal capacity. It seemed that the call for a new European emergency fund did not go much further than these two European Commissioners. At the European summit in Prague, Draghi was depicted as crying in the desert. ‘It is his last summit’, he sounded somewhat putative.
The most interesting question is how political noise can turn into a signal after all. The short answer is: Germany. Time and again the Germans show themselves sensitive to the moral attacks from the South. The German reflex is: rather pay than seek the conflict. At first, Chancellor Olaf Scholz and Finance Minister Christian Lindner insisted they were unimpressed by their colleagues’ reproaches. But very soon they rushed to explain that Germany was not necessarily against a new loan instrument.
cohesion funds
There was good talk about a new SURE-like program – the European instrument for financial support for temporary unemployment, set up during the corona crisis. The Germans just thought it was a bit early to start talking about this now, as there was still so much money available within the Covid Recovery Fund, the cohesion funds and within the frameworks of REPowerEU.
Too early or not, President Ursula von der Leyen’s European Commission will probably come up with the first ideas ahead of the European summit on 20 and 21 October. Although this will not be a fully developed proposal, which the northern leaders will immediately agree to, it will suffice as a signal. After three successive European crises, people in The Hague are fed up with all that Italian fanfare. But there is a simple explanation for this behavior: it works.