Social Europe: ‘Corona bonds’ and Europe’s north-south divide (13th April 2020)

The compromise agreed provisionally by the Eurogroup meeting of finance ministers on April 9th was a relief. For the Eurogroup to have broken up a second time in a week without a deal would have been a disaster. It would probably not have resulted in a bond-market panic—massive interventions by the European Central Bank have neutralised that possibility for now. But in political terms it would have sent a terrible signal of disunity.

The three-pronged package—with funding for health expenditure via the European Stability Mechanism, loans for businesses from the European Investment Bank and €100 billion for the European Commission’s unemployment fund—is modest in scope. It is disappointing to those of us who support the ‘corona bonds’ position. But it is a relief at least that it was a compromise, rather than a humiliating capitulation inflicted on the coalition of the nine advocates of corona bonds by the stubborn and short-sighted egotism of the Dutch and Germans. [...]

Of course, one should never say never. Sophisticated polling reveals an openness on the part of the German public towards corona bonds, which could be exploited by creative and brave political leadership. Expert opinion has shifted quite markedly; the broad-based calls for joint action from German economists are new and extremely welcome. Both in Germany and the Netherlands a large part of the public is frankly embarrassed by their government’s positions.

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Spiegel: Berlin Softens Tone on Turkey

The looming collapse of the Turkish economy is a genuine dilemma for the German government. It doesn't want the Turkish economy to fall deeper into crisis, no matter what. "If Turkey becomes unstable, we'll have a huge problem in Europe," claim sources close to Merkel. They are worried about potential consequences for the eurozone and the German economy, about the 3 million Turks living in Germany and about the possible unraveling of the deal with Ankara that is preventing more refugees from making their way to Europe. [...]

When Andrea Nahles, the head of the center-left Social Democrats (SPD), raised the possibility of German aid for Turkey, it was followed by a prompt denial from the government. German Finance Minister Olaf Scholz of the SPD also had little enthusiasm for the idea. [...]

At the same time, the German government set in motion an unprecedented round of phone calls and visits. Finance Minister Olaf Scholz demonstratively invited his Turkish counterpart and Erdogan's son-in-law Berat Albayrak to Berlin. Even before President Erdogan embarks on his visit with full military honors to Berlin in four weeks, Foreign Minister Heiko Maas (SPD) will travel to Ankara. He will meet with his Turkish counterpart Melvüt Cavusoglu and Parliamentary President Binali Yildirim and possibly even Erdogan himself. Economics Minister Peter Altmaier (CDU) is planning a visit to Turkey a few weeks later. [...]

But the German government also wants something back in return for its support. It has communicated to Ankara in various ways that the seven Germans still being held in Turkey for political reasons, partly without charges, must be freed. The lifting of the ban on Turkish-German journalist Mesale Tolu leaving Turkey on Monday is being viewed as an early sign of compromise by the German government, and as an indication that further decisions in this vein can be expected in the near future. If that happens, German government sources say, it is also feasible that Germany would stop blocking negotiations in the EU for a customs union with Turkey.

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Jacobin Magazine: Last Chance, SPD

The report concluded that the SPD is no longer perceived as a credible voice on issues of social and economic justice. It argued that Martin Schulz’s election as leader had been a small step in the right direction, but that the many compromises among the party leadership (whose main goal seems to be avoiding having to distance themselves from the neoliberal reforms they imposed in government in the mid-2000s) meant that his election slogans about social justice rang hollow. Above all, the report emphasized a “collective failure of leadership” — not only were Schulz and his predecessor Sigmar Gabriel at fault, but the entire leadership which had set the party’s agenda for years. Despite these blunt truths, and earlier announcements that the party would be seeking to renew itself, the SPD has made an almost pathological choice to continue with more of the same. [...]

The SPD now promised to reinvent itself while in government and sent both Martin Schulz and Sigmar Gabriel into (temporary) political retirement. “Renewal,” however, meant that not a single member of the party’s left wing joined the new leadership: no one who campaigned against re-forming the grand coalition found themselves in a leading position. The only new face in the party leadership is the new general secretary, Lars Klingbeil. But Klingbeil is by no means a man of the Left; he is, in fact, a long-standing member of the Seeheimer Kreis (“Seeheim Circle”), an influential grouping on the right of the party. [...]

After the election, when it initially seemed as if the SPD would take up a position in the opposition, Nahles told journalists that the party would attack the CDU head-on. Now, she is busy explaining that Germany “can’t take in all” of the refugees. Pragmatism veering into cynical opportunism is nothing new for SPD elites, but nonetheless never fails to amaze. [...]

The list of Scholz’s political achievements is long but give the list to someone with no knowledge of the man, and they may be shocked to find out that he claims to be a social democrat. This is not to say that he could have been from the right-wing extremist Alternative für Deutschland (AfD), but simply that Scholz largely embodies the archetype of a bourgeois rather than Social Democratic politician. In 2001, as the Hamburg city-state’s Senator of the Interior, he passed a law that allowed police to forcibly administer emetics to drug dealers — a measure the European Court of Human Rights later labelled a human rights violation. This, from a man who began his career as a left-wing Juso.

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Politico: Scholz: ‘Timing is good’ for EU financial transaction tax

An EU-wide tax on financial transactions should finally become reality as the bloc seeks to fill the hole in its budget left by Britain’s departure, German Finance Minister Olaf Scholz said in an interview with Der Spiegel magazine published on Saturday. [...]

Scholz noted the idea of using a financial transaction tax to bolster the EU budget had been raised by French President Emmanuel Macron. He suggested it could raise between €5 billion and €7 billion.

Scholz also said it was “right and proper” to think about how revenue earned by internet companies in Europe should be taxed, but stopped short of endorsing an EU-wide digital tax — another idea advanced by Macron.

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Spiegel: Germany's Incredibly Shrinking Role on the World Stage

Germany has fallen into the background again, and this isn't solely the result of Merkel's tortuously protracted attempts to form a government following elections last September. That is the spin the Chancellery is now giving it. But in recent years, Merkel has frittered away much of her political capital -- particularly with refugee policies that were an affront to almost all of Germany's allies. Merkel has also seen her power in Berlin diminished significantly. For years, Horst Seehofer -- who heads the Christian Social Union (CSU), the Bavarian sister party to Merkel's CDU -- gave the chancellor a free hand in foreign policy matters. But he now says there is no way he would have gone along with a military strike against Syria. "I would have used my veto," he says.  [...]

At the same time, the chancellor also felt thoroughly flattered. Merkel had long hesitated in announcing whether she would run for a fourth term, but she decided to do so just a short time after Trump's election, a decision that was linked to a feeling that her leadership was badly needed in a world that was coming unhinged. And then, in the middle of her campaign, she made her famous statement that made it sound as though Merkel was abandoning the postwar order. Europe, she said, had to be prepared to "take its fate into its own hands." [...]

Merkel would never come to the idea of seeking to assume America's leadership role. She's fully aware of the dilapidated state of the Bundeswehr, Germany's armed forces, and she knows that the German people don't want to become entangled in the world's conflicts. Merkel's pragmatism has always been the source of her success. It was only when she showed an apparently idealistic side during the refugee crisis that her popularity began to slip. [...]

Even if it is difficult for her, the German chancellor needs to establish better ties to Trump, and it would be correct to rebuild contacts at all levels. Macron has already demonstrated that it is possible to exercise influence on Washington. It's in Germany's interest that the United States remain in Syria in order to protect the Kurds there from Turkish aggression, but also to ensure that a Western presence remains and that the conflict is not left entirely in the hands of the Russians, Iranians and Turks.

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Politico: Andrea Nahles: German SPD’s last hope

To revive the party, Nahles will have to keep both centrist and left-wing factions on side and find ways to give the party a distinctive profile even as it serves in a government led by Merkel’s conservative bloc. In previous stints as Merkel’s junior partner, SPD members have complained that the chancellor takes credit for their achievements while their voters are alienated by conservative policies pursued by the coalition. [...]

Nahles, who already leads the SPD group in the Bundestag, is viewed as being on the left of the party, but has shown a pragmatic streak. She is also known for remarks that are unusually blunt for a German politician.  [...]

She is also considered a gifted political operator responsible for some of the biggest milestones in the party’s recent history. As labor minister, she put in place Germany’s first minimum wage laws. [...]

At a tense congress in January, Nahles was widely credited with stewarding the party toward another partnership with Merkel. Following a long and meandering address by the party’s then-leader Martin Schulz, she woke up the room with a short, rousing speech in which she exhorted delegates to approve coalition talks.

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Social Europe: A European Germany Returns?

There also was something in the same briefing to Kohl of which he had been unaware and that Merkel may not yet appreciate: EIB bonds do not count on the debt of Germany or any other major member state of the Union, nor need count on the debt of others. In this regard, they parallel US Treasury bonds which do not count on the debt of California or Delaware. What’s more, the servicing of EIB bonds is by the member states which gain from the investments that they fund, not by fiscal transfers from others, or from the Commission’s tax funded Own Resources. Further, aided by the Amsterdam criteria for social and environmental investments, the EIB quadrupled its investment finance in the decade from 1997 until the financial crisis to four fifths of Own Resources. [...]

Moreover, the joint EIB-EIF case has been fully grasped by Emmanuel Macron. When minister of economy and industry in the second Valls government he argued in September 2014 that to offset the low subscribed capital of the EIF the EU should access unused resources from the European Stability Mechanism. As an adviser put it : “If we could mobilise €20 to €40 billion from the ESM, for example to recapitalise the EIF, you then have a multiplier effect on the EIB that can reach almost €200 billion of public money”.

Wolfgang Schäuble opposed Macron, claiming that this was not within the ESM’s remit. But legal advice to the European Parliament declared that it was not excluded that the ESM should ‘fulfil other tasks’ to assure the stability of the euro for which a sustained recovery of the European economy is vital. Besides which the private sector multipliers from EIB investments range up to three, which could mean that the total public and private investment generated could reach some €600 billion, with further employment and income multipliers. And, because the Roosevelt New Deal was bond financed, it managed to reduce unemployment from 22% to 8% in the seven years from 1933 to 1940 with an average annual federal deficit of only 3%, i.e. the Maastricht limit.  

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Deutsche Welle: Emmanuel Macron, Angela Merkel meeting a test for EU financial policy

Judging by what individual representatives of the CDU, its Bavarian sister party the Christian Social Union (CSU) and the SPD have said so far about Macron's reform ideas, the grand coalition partners have indeed taken different positions. Until now, Scholz has held back because he knows that within Germany he is expected to continue the solid (some say, stingy) financial policy of his CDU predecessor Wolfgang Schäuble.

However, other SPD politicians have been extremely enthusiastic about Macron's ideas. Former SPD leader Martin Schulz — who also previously served as European Parliament president — had made a positive German response to Macron's ideas a prerequisite for a new grand coalition. As recently as Wednesday, new top diplomat Maas said in Paris that he had come to "finally take the outstretched hand of Emmanuel Macron with his proposals for the renewal of Europe." [...]

However, according to Caspary, the differences in opinion do not change the common goal of strengthening the European Union. A few days ago, Merkel complained that Europe was "too weak and too slow" in many areas. She wants to change that. She agrees with Macron that without him, without France, this is not possible. "I don't believe for a second that a European project can be successful without, or against Germany," Macron told the German daily Frankfurter Allgemeine Zeitung. "We are completely interdependent."

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