TINA: The EU didn’t start with a completely blank page when trying to dream up solutions to this problem, and there were certainly no shortage of academics, think tanks and politicians with ideas that were ready to be taken off the shelf and dusted off from the last crisis – from helicopter money to Eurobonds. Letters and op-eds were fired off in all directions. The Commission was – as ever – left walking a tightrope, working out what was possible under the Treaties and more importantly what was conscionable for its 27 eclectic governments.
But this time it is different. Europe’s travails over a possible Grexit from the euro has (I think) given a new maturity to discussions, to borrow from Margaret Thatcher. Europe has reached its TINA moment – there is no alternative. As an aside, at some stage Europe will tip its hat to Jean-Claude Juncker for keeping things together in the turbulent pre-TINA years.
Dei ex machina: On the morning of 18 May, word was sent out that Macron and Merkel would make an announcement. Journalists across Europe waited with bated breath. Would it be big enough? Would it be too circumscribed? How far would they be willing to go in offering new tools?
The Franco-German initiative had three elements, but most attention was focused on the recovery fund. The initiative proposed a €500 billion fund, supported by borrowing on the markets on behalf of the EU – a limited form of mutualized debt. This was the green light that the European Commission needed for its proposal.
It also referred to fair taxation, something that those countries involved in aggressive tax planning that has siphoned billions from other EU countries might want to think about when they take a stand against greater collective solidarity – I’m looking at you, the Netherlands.
Next Generation EU: On 27 May the European Commission finally unveiled its proposal: the Next Generation EU of €750 billion as well as targeted reinforcements to the long-term EU budget for 2021-2027 bringing the total financial firepower of the EU budget to €1.85 trillion.
This will have to receive unanimous support from all EU states, but the ground has shifted. Last night, Berlin unveiled another massive stimulus to the German economy. The ‘Schwarze Null’ policy has been thrown aside – Germany’s just got counter-cyclical, dare I say Keynesian – and yet Chancellor Angela Merkel is soaring in national polls. The magnitude of the challenge has been widely understood, even if the effective treatment is not yet universally acknowledged.
Germany will take the helm for the rotating six-month presidency of the European Union on 1st July. There is one main goal on their mind, reflected in their chosen slogan: ‘Together for Europe’s Recovery!’