unizeit Schriftzug

Treacherous rescue rhetoric

In addition to the already abundant problems, the European Union has also been forced to tackle the consequences of the coronavirus pandemic for almost a year now. However, experts at Kiel University have their doubts about whether the EU is doing so in an appropriate manner.

Euro coins in the sky
© pur.pur

The EU wants to put €750 billion into a so-called recovery fund so that the member states badly affected by the coronavirus can recover from the crisis better. Professor Gabriel Felbermayr, President of the Kiel Institute for the World Economy (IfW), has numerous problems with this plan, starting even with the terminology. "The German term ‘Wiederaufbau’ (literally meaning reconstruction or in this case, recovery) is an annoying generalisation," he said, pointing out that although Europe may be experiencing a difficult phase, it is not at war: "A building that has not been entered by anyone for three weeks, or even three months, is not gone. So it also doesn’t have to be reconstructed."

For the Kiel economist, this is not completely beside the point, because in his opinion the inappropriate rhetoric leads "away from what it’s all about". Accordingly, it’s not bomb craters – to stick with the metaphor – that are the problem, but instead the economic upheavals triggered by the efforts being made to curb the coronavirus pandemic. However, all the economic data shows that these upheavals already occurred in the spring, so that in Felbermayr’s assessment the EU is simply too late with its recovery plan: "The deep valley of despair is already behind us."

Professor Florian Becker from the Chair of Public Law at Kiel University has other reasons to take issue with the multi-billion Euro package, and speaks of a "questionable primary legal competence basis." This means that the authorisation for putting together the package cannot be drawn directly or from primary law of the European treaties themselves. Nevertheless, debts are envisaged due to the fund which equal three-quarters of the total EU financial budget for the years 2021 to 2027. For the legal scholar, the sheer numbers alone already represent "a new dimension", which should accordingly be soundly legitimised.

Becker is largely in agreement with his colleague from the Kiel Institute for the World Economy (IfW), that the coronavirus aid only brings back old problems in a new guise. As such, financial aid granted after the banking crisis of 2008/09 was still subject to conditions, which were mainly based on sound financial management and structural savings. In contrast, there is no longer much talk of such conditions for the coronavirus fund, and instead there is the prospect of a relaxed repayment of the credit-based part of the aid by the year 2058. Becker's suspicion: "The whole thing does not so much serve crisis management, but rather to transform the financial constitution of the EU." This, in turn, would in his opinion actually require a treaty amendment. However, because that would be associated with an extremely lengthy process, Professor Becker certainly understands why those responsible took a short cut using the EU budget. "It is more of a transfer element than a stabilisation element," said Felbermayr to also confirm this assessment. And furthermore, he criticises the fact that projects which started a long time ago, such as those for digitalisation or climate protection, suddenly form part of the recovery fund.

On the other hand, Felbermayr has no objections in principle to using more money from Europe to stimulate the economy, and also to promote desirable political projects. In his opinion, that makes sense particularly if this money is used for European public goods, such as protection of the external borders, the promotion of science and research, or the expansion of data, electricity and rail networks.

However, if it becomes a paradigm shift away from funding with conditions to the pure principle of solidarity, which both professors at least see signs of, then in their opinion this will cause serious difficulties to convince the richer countries. They fear that ultimately, the EU could thus face a serious legitimacy crisis after the coronavirus crisis.