The coronavirus shook the roads to Berlin due to the division of the EU’s money: will Lithuania’s position also change? The | Deal

It was Germany, along with France, that on Monday afternoon officially proposed the creation of $ 500 billion. to rebuild the EU economy, which is experiencing a major crisis due to the coronavir pandemic.

And although both French President Emmanuel Macron and German Chancellor Angela Merkel have avoided the word “Eurobonds”, there is talk of so-called “crown bonds”.

After all, this new fund would be financed by market loans on behalf of the EU, and recipient countries won’t have to pay back; the money will be paid out through various future EU multi-annual budgets.

In other words, it is clear that Germany has changed its mind or has succumbed to the southern EU countries, particularly Italy and Spain, which have long called for an agreement on a joint EU loan service.

Vilnius, as well as the Dutch, Austrians and Scandinavians, have been under pressure near Berlin, at least until now.

Although the presidency announced in mid-March that Gitanas Nausėda welcomed the idea of ​​a joint loan, the Ministry of Finance rejected it. It is true that Monday’s offer is a little different.

The new Franco-German proposal, which has already been well received by the European Commission, will have to be approved by the 27 EU member states. Is a veto possible? Maybe we even get it from Lithuania?

Total debt, your total repayment

Germany, the Netherlands and other wealthy countries have so far seen the corona bond offering as an attempt by indebted southern states to unfairly take advantage of Nordic fiscal discipline.

Merkel: “We are convinced that now it is not only fair, but also necessary to allocate funds. <...> When there are special circumstances, special measures. “

This Nordic view may not really change at all. However, the sad reality is probably already being perceived: that if we don’t give up, not only the economies of individual countries could be jeopardized, but the entire EU project, or at least the euro area project.

Therefore, A. Merkel chose the words not at random. She said: “We are convinced that now it is not only fair but also necessary to allocate funds. <...> When there are special circumstances, special measures. “

“The crisis we are experiencing is unprecedented and requires an effective, collective and European response. The virus knows no borders and damages all of Europe,” Macron was not far behind.

Briefly about the proposed plan: the recovery fund would consist of common EU bonds and the European Commission would distribute the funds to the affected countries and regions in the form of subsidies that would formally form part of the normal Community budget.

Merkel has already hinted at the meticulous conditionality of such subsidies, and the European Commission emphasizes that these funds will not be used strictly to implement non-crisis mitigation decisions, such as budget patches.

Debts to investors would be paid from various future EU multi-annual budgets. France has previously proposed allocating quantities until 2060.

“It was foreseeable that Germany would accept its own largest contribution to the new multi-annual EU budget.”

Most surprisingly, Germany has supported the distribution of borrowed money. This is a more serious change of position. ” 15 minutes said Ramūnas Vilpišauskas, a professor at the Institute of International Relations and Political Science at the University of Vilnius.

Everyone thinks of its constituents

Eurozone finance ministers had already discussed, to be more precise, disputed, the EU economic recovery fund last week. As the report on the Berlin-Paris proposal already exists, it could be assumed that disagreements have softened.

However, the proposal will still have to be approved by all EU member states, including Lithuania. The process is likely to be very complicated: it is clear that Austria, the Netherlands and Finland, which, like the German economy, can at least try to oppose the plan.

Kurzas and other saver leaders on the continent are unlikely to have squeezed no significant commitments for themselves from Merkel or Macron.

Austrian Chancellor Sebastian Kurz, for example, has already made clear that Vienna, a staunch advocate of austerity, is not changing its mind about subsidies, even during the pandemic that hit the southern EU members hardest.

“It just caught our eye then. We are ready to help the worst affected countries with loans.

We hope that the renewed multiannual financial perspective will reflect new priorities, not raise the ceiling, “Kurzas wrote on Twitter after a conversation with the prime ministers of Denmark, the Netherlands and Sweden.

The subject, of course, remains a sensitive one, but the coronavirus outbreak in Europe seems to have caused a really huge economic crisis, so Merkel decided to respond to requests from the south to show solidarity.

“Germany and France are fighting for Europe,” said the German chancellor, who undoubtedly still faces a challenge in the Bundestag as the proposal will have to be approved by parliamentarians.

Furthermore, it is unlikely that Kurz and other savvy leaders on the continent have not made significant commitments to them by Merkel or Macron; otherwise, Monday’s proposal would hardly have been made public.

R. Vilpišauskas emphasized that the so-called “Saving Four” does not seem to change its position so far, therefore, it does not tend to consider the proposal as a “significant shift in EU policy”. But it is possible to calm the Nordics.

“Without agreements between Germany and France, agreements between all EU countries are not possible. Now it is very interesting if the frugal will change their position before the next summit.

Also, the details about grant making are very important, and can be deduced from A. Merkel’s statement that the conditions will be provided, even though Southerners do not like them. The Germans are in contact with the other Nordic countries.

The national political audience is very important here: the leader of each country thinks about his society and his voters, so handing over the initiative to Germany and France can be beneficial for the leaders of the other countries of the “Quartet”: they show that they are still struggling. ” 15 minutes taught by R. Vilpišauskas.

The crisis is different, hence the flexibility

“It’s a good deal,” said Lucas Guttenberg, a former European Central Bank economist who now works at the Jacues Delors Center in Berlin. – It’s very clear. There are no spells, just simplicity: European bonds for EU spending. “

As already mentioned, the proposal is also valid for the European Commission, which will present a draft of the general proposal for economic recovery next week.

Other analysts note that the plan, which offers subsidies instead of loans, shows that Merkel is making a big discount, and the German chancellor realized that she had learned from mistakes in the past.

When wealthy EU countries and Brussels bailed out Greece and other countries during the eurozone debt crisis, many in the South were particularly reluctant to make Berlin’s demand for savings in the first place, which was a key condition for rescue plans.

Guttenberg: “The proposal is very clear. There are no spells, just simplicity: European bonds for EU spending. “

“It is very important what people from other EU countries think about Germany and its policies. After all, in Italy, public opinion about the EU as a whole has deteriorated considerably.

And neither the German chancellor nor other countries want Italy to withdraw. In economic terms, not only Italy itself would be affected, but also other members of the euro area. Therefore, the change in Germany’s position can also be seen in this broader context. ” 15 minutes R. Vilpišauskas confirmed.

Finally, this year’s crisis is different: Unlike the debt crisis, it was not caused by government errors or manipulation of financial figures, but by an unpredictable virus. As a result, it was easier for Merkel to agree to release the financing terms.

And the opposition from the Netherlands, Denmark, Austria and Sweden is not necessarily eternal. A French diplomat, Politician, explained that both Macron and Merkel had spoken many times and would continue to speak to Dutch Prime Minister Mark Rutte.

“Everyone knew what was going to be announced, it was not as if they had heard about the plan on television. Paris and Berlin kept the Commission and the various member states informed of the discussions, “said the official.

Of course, the details and footnotes of the proposed agreement, which are, as usual, very important, will still be discussed in the coming weeks and months, for example at the next European Council. Merkel herself admitted: “We have a short answer, but it will take longer.”

What do you think of Vilnius?

Lithuania is also expected to receive more information and clearer statements from other euro area leaders. At least that’s what I assumed 15 minutes Professor R.Vilpišauskas, who contacted him, hit.

Lithuania’s Deputy Finance Minister Miglė Tuskienė told the portal on Tuesday: “This is the beginning of the discussion. Everyone agrees that Europe needs a recovery plan, extra money. “

However, M. Tuskienė emphasized that the latest proposal is only one of several ways, and its details should be clear only next week, when the European Commission will provide more information.

“It just came to our attention then Grant us. However, we believe that the Commission will present a proposal that includes grants and loans.

We never said that we were completely against subsidies. Other things are important to us: we want a joint debate with the multiannual financial perspective.

We also say that new instruments should not be developed at the expense of the old programs: cohesion, agricultural policy. So the question arises how we will finance this impressive amount.

It is important that Lithuania does not suffer from traditional instruments, which in our case work perfectly. There are no details yet, and the devil is in the details. ” 15 minutes said the deputy finance minister.

M. Tuskienė stated that Lithuania will probably not block subsidies, but that it will definitely seek the maximum benefit for the country: “We have always said that we must analyze the balance, amounts and criteria.

And we will definitely negotiate the criteria high enough. We will not be passive in this debate and we will defend our interests. We are not so radical that we would immediately oppose it: European solidarity must exist. “

According to R. Vilpišauskas, Lithuania and other Baltic countries are in a rather interesting situation. On the one hand, they position themselves as the Nordic countries.

M.Tuskienė: “It is important that Lithuania does not suffer from traditional instruments, which in our case work perfectly. There are no details yet, and the devil is in the details. “

“This is understandable, because the debts of the Baltic countries, especially Estonia, are relatively small. Therefore, there are reasons to talk about compliance with the rules, including those relating to the euro area or state aid to companies , which is very important for small countries in general.

If the rules are not followed, it is generally the small countries that suffer. But at the same time, the Baltic countries receive more from the EU budget than they pay, “said the professor.

According to R. Vilpišauskas, despite the rapid growth of the economy, the Baltic countries are still much poorer, especially compared to Sweden, Denmark, Austria and the Netherlands.

“Recipient countries therefore have slightly different interests in this regard, both in terms of the Multiannual Financial Framework and the grants now being proposed. After all, such states can get more than others.

This situation cannot but affect the approach, and I believe that the Baltic States will eventually accept a compromise. On the other hand, nobody will be in a hurry to express a position ”, the professor taught.

Economy and geopolitics

Both R. Vilpišauskas and M. Tuskienė drew attention to the fact that it is not yet clear according to which criteria the funds of the proposed fund would be distributed.

Suppose that if the criterion is health care, Lithuania has not suffered too much. But the Baltic economies are forecast to fall more sharply than in other parts of the euro area.

According to R. Vilpišauskas, who does not see the possibility of a veto in Vilnius, it is almost certain that the small members of the EU, including, of course, Lithuania, will still want to be part of the process, which “eventually becomes the main reason “

“Even if there may be negative economic consequences, they are generally outweighed by geopolitical interests.” 15 minutes R. Vilpišauskas said.

R.Vilpišauskas: “I would not be in a hurry to announce a particularly important advance. The proposal is serious, yes, but even when such plans are approved, they generally relax in the search for compromises. “

He recalled explanations by former Estonian President Toomas Hendrik Ilves, why the country was in such a hurry to join the eurozone as soon as it emerged from the financial crisis. T.H. Ilves is said to have emphasized the more geopolitical motives, not the economic benefits.

Finally, the professor believes that the Baltic countries should at least have tried to negotiate certain guarantees and equity even before the decision of Berlin and Paris to announce a proposal for an EU Economic Recovery Fund.

It is true, M. Tuskiene 15 minutes He stated that “until now there were no details, as was the discussion.”

Be that as it may, R. Vilpišauskas suggests not emphasizing languages, that yesterday’s news on the German and French proposal is a significant step towards the federalization of the EU.

“I would not be in a hurry to announce a particularly important breakthrough.” The proposal is serious, yes, but even when such plans are approved, they generally relax in the search for compromises.

I recall that during the eurozone debt crisis, almost all the European Councils in 2010-2012 announced historic decisions for European integration. I counted twelve of those councils, and each preached historical decisions.

Those agreements showed a movement not towards a federation but towards closer intergovernmental cooperation. These are two different things. Therefore, I would be careful: political reality is different. ” 15 minutes R. Vilpišauskas said.

For his part, MEP Andrius Kubilius 15 minutes He said that Merkel and Macron’s initiative is not very original. Similar issues are said to be being considered by the European Commission.

“It is important here that the two main EU states have clearly defined their positions on these initiatives. This is the beginning of the discussion,” said A. Kubilius, who also drew attention to the already dissatisfied dissatisfaction of economic member states. of the community.

As the information in the public space realized, the extra money would be in addition to the cost of the multiannual financial framework.

“This raises some unanswered questions, because the debt and its repayment will be based on the next multi-year financial perspective, after 2027.

If this continues, the budget for those multiannual financial perspectives will be distributed in advance at some point. In this way, lending future budgets, “said A. Kubilius.