- + EU member states agreed upon a €750 billion relief package.
- + Issuing common EU debt points to increase European solidarity.
- + The deal is a major win for Macron, a strong proponent for European fiscal integration.
Why is Macron’s heat level Blazing?
Answer: European leaders agreed upon a €750 billion Covid-19 relief package.
“Let us have the audacity to create a sovereign, united and democratic Europe. Let us not focus on our internal divisions, but strive to create a strong Europe capable of assuming a leading position in today’s world.” When Emmanuel Macron laid out his vision for Europe back in 2017, he expressed the will to continue European integration on three major fronts: security, budgetary and environmental.
As his presidency started in 2017, Macron realized that his ambitious proposals of giving the eurozone a common budget and finance minister were far from unanimous. The common budget, taking the form of a fund, would help support competitiveness, economic convergence and stabilization mechanisms. By 2018, Macron had secured the backing of Germany, and negotiations began between EU finance ministers in 2019 over the fund’s mechanisms. The “Frugal countries”, led by the Netherlands, objected to their taxpayer funds being used to help other countries. This led the eurozone budget to be slashed considerably, while plans to create pan-European taxes also faced strong resistance. Confronted by the deep divide in European vision between member states, Macron seemed to settle for a severely weakened budget with no stabilization mechanisms and no more than a few dozen billion euros. However, the onslaught of the Covid-19 pandemic upended the situation in Europe.
As economists predicted the EU economy would contract by up to 8.3% in 2020, it became clear that it was finally time for the EU to step up and play a decisive hand in mitigating the pandemic’s effects. In this time of crisis, Macron knew his European vision stood as the solution to save the Eurozone’s economy. Stepping up to the challenge, he proposed a €750 billion Covid-19 rescue fund, financed by loans guaranteed by the European Union, which would include €500 billion in grants to the most affected countries. Macron’s next victory was successfully pairing with Germany’s Merkel to champion the rescue fund, giving the deal a strong chance of success within European proceedings.
With the Franco-German pair backing the Covid-19 rescue fund, negotiations began between EU member states on the 17th of July. Although Macron and Merkel encountered strong opposition from the Frugal countries led by the Netherlands, a deal was reached by the 21st of July. The EU Commission will borrow €750 billion from the financial markets from 2021 to 2026 in the name of the EU 27, creating a common European debt. An EU budget of €1.1 trillion for 2021-2027 was also agreed upon.
The Covid-19 European rescue fund and EU budget is the greatest success of Macron’s vision for a united, sovereign Europe. The French president’s push for an EU budget was brought to life by the necessity to compensate for the pandemic, and duly implemented by the Eurozone member states. The deal reveals the importance of a strong EU, displaying the power the Union is able to project domestically and throughout the world. By agreeing upon a common debt, Eurozone budget for the next decade, and aiding the hardest-hit countries, the EU 27 displayed solidarity few thought was possible. The newfound consolidation of a strong European Union (although divisions remain) and new fiscal instruments implemented into the single market will facilitate the formation of a monetary and fiscal union. Covid-19 looks increasingly like the trigger to a new decade of European integration.
What is changing Macron’s heat level?
Answer: The European rescue fund fulfils Macron’s European vision and campaign promises.
European founder and visionary Jean Monnet said: “Europe will be created in times of crisis and will constitute the sum of the solutions to these crises.” Monnet was proven right, as Emmanuel Macron took on Europe’s founding father to accelerate European budgetary and fiscal integration in response to the Covid-19 triggered recession. Macron negotiated that €750 billion would be borrowed from the market by the European Commission in the name of the EU 27, issuing common European debt. Of these funds, €390 billion will be given out as grants (down from the original €500 billion) and €360 billion as loans.
The French and German leaders had to make important concessions, such as increasing the Frugal four’s rebates, meaning France will have to pay an extra €15 billion over the next decade to the EU. Although EU benefits for France far outweigh this extra sum, Macron runs the risk of harming his popularity in France due to the potential extra taxes needed to finance France’s contribution to the EU budget. Mandatory clauses on democracy to access the recovery fund were relaxed to gain Poland and Hungary’s votes, as well as environmental clauses for the largest carbon emitters. Nevertheless, the recovery fund and EU budget is a major step forward for Macron in terms of electoral promises regarding European integration, mitigating the French economic recession and reassuring French public opinion in a post-COVID-19 world. Macron summarized: “Think of the distance that we have covered. Ever since February, we have not been able to come to some type of agreement,” he said. “Now we have the budget, we have the recovery fund and this amounts to almost 2% of the EU GDP.”
Macron’s ability to form a strong partnership with Germany in support of the recovery fund and the subsequent successful negotiations with the EU 27 demonstrated the French president’s European leadership in the eyes of the media and public opinion. Although he and Merkel had to make concessions, the recovery fund retained its original total of €750 billion, common debt, and grants for the hardest-hit countries. Many newspapers chose to focus on the divisions within the EU, but the real outcome of the deal is that Europe is going down a path of more integration, closer cooperation and the outlines of a federation; in other words Emmanuel Macron’s vision for Europe.
What is driving Macron?
Answer: The will to create a stronger Europe and help French Covid-19 recovery.
Emmanuel Macron is driven by two main elements: guaranteeing economic recovery for France and Europe, as well as the development of his European project.
The realities of the Covid-19 crisis forced European leaders to spring into action and adopt Macron’s plan for a common Eurozone budget. The projections of a massive French recession, not seen since World War II, drove Macron to obtain a comprehensive rescue package from the EU in the form of common debt. The European funds will greatly help French economic recovery while limiting the buildup of French debt: France will benefit from €40 billion in grants. A strong French economic recovery backed by the EU is key for Macron, as it fulfils his electoral promises and boosts his re-election chances in 2022.
The French president has made clear that Europe is at the heart of his political project. Macron’s European vision is based on the reality that only a unified European Union can project the economic, military and diplomatic power to match China or the US. Individually, European countries cannot rival these superpowers. Aiming to accelerate European integration, Macron exploited the Covid-19 crisis to his full advantage by displaying the scale and power of a unified European response. Common Eurozone debt, financial grants and the project of new pan-European taxes create the outline for a European fiscal and monetary union. Successful European economic integration creates the foundation for further security, environmental and social integration, creating a unified European bloc capable of occupying a leadership role on the world stage. Leading this new wave of European integration, Macron’s aim is to solidify France’s leadership position within the EU and accelerate the creation of a new global superpower.
What does this mean for you?
Answer: A European federation?
The European Union is often described as a half-finished project, or an experiment that went wrong. Detractors forget that Rome was not built in a day. Such an ambitious project requires time, experimentation and strong leadership from leading European states, notably Germany and France. The idea to unite under a single leadership a continent that has been at war for centuries would have put an individual in a madhouse 100 years ago. However, in the EU’s short history, the greatest advances in European integration have come during times of crisis. European leaders have risen to the challenge numerous times, and in every instance, the key to that solution was European cooperation through the European Union.
Europeans came into the Covid-19 crisis with a monetary union, with a European Parliament and European courts. Europeans have risen to the challenges posed by Covid-19 with medical cooperation, a European rescue fund and a European budget for the decade. European states have agreed to collectively indebt themselves for the next 30 years to help fellow member states, breaking from the austerity measures imposed upon member states following the Eurozone debt crisis. The outset of the crisis will form the outline of a European fiscal union, which by complementing the monetary union will give the EU an independent economic governance. This would then open the door for security, political, and environmental integration. These predictions may seem utopic, but so were predictions about the EU’s current status 20 years ago. The Covid-19 crisis could mark the start of new European integration leading to a European Federation.