The EU Summit: Lagarde and Von der Leyen vs Merkel . Aid vs Loans

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Lagarde and Von der Leyen’s support to Spain and Italy re-balances powers in the EU, where the next battle will be to decide whether to help with loans.

There were only six women among the 32 participants in Thursday’s European summit, the fourth called to respond to the coronavirus crisis , but several of them starred in the meeting.

The usual leading role of the German Chancellor, Angela Merkel, was joined this time by the belligerence and forcefulness of the President of the EC, also German Ursula Gertrud von der Leyen , and the President of the European Central Bank, the French Christine Lagarde. This time there were no tense crossings, as in March, among other things because of the format – you had to call a specific phone to ask for a reply and there was no negotiation of a text – but there were punches with clear intentions, winks and some smile.

Von der Leyen and Lagarde came out in defense of a powerful European intervention to prevent the pandemic from cracking the EU and leaving the most affected countries without available resources for recovery. The position of the two community leaders was interpreted as clear support for the line defended by various governments, in particular that of Pedro Sánchez.

Lagarde marked the summit with a disturbing start that reminded everyone, including the Nordics who are most resistant to giving aid, the gravity of the situation and the risk of a very unequal distribution of the crisis. “We are concerned that the risk premiums of some countries are rising . The risk is that we do too little too late. It has not yet happened, but there is a risk of contagion to the financial sector. And especially of a growing asymmetry in the debts and of a division in the market ”, she said, according to several delegations. Lagarde picked up the speech in which von der Leyen called for more firmness and proposed a 3 F action: ” Fast, firm and flexible”.

The allusion to Berlin’s massive aid plans were evident. And Merkel fitted the attack with sportsmanship. “It is clear that they refer to Germany, but if we had not reacted other countries would also have been splashed with damage to our economy,” he said. Merkel asked her partners for more margin to help German companies because that would be in everyone’s best interest. “If we do, they criticize us, but we have margin and what we cannot do is do nothing,” he justified.

Several delegations saw Merkel much more flexible than other times. He even joked about the fact that it is already assumed to be part of a trillion euro fund. “I know that Germany has to shoulder its share of solidarity and I am ready to do it. Germany’s destiny is closely linked to Europe. ” He spoke, like Macron, of fiscal harmonization, a blow to semi-tax havens like the Netherlands.

The great discussion that will take place in the coming weeks and pointed out at the summit does not focus so much on the dimensions of the aid fund , but rather what percentage will be in the form of transfers and how much in the form of loans. Countries like Spain, France and Italy demanded that they all offer aid, while others like Holland, Austria, Sweden and Denmark – these last two governed by Social Democrats – demand that they all offer loans.

Macron and Sánchez made a clear clamp this time. The Frenchman said he agrees with the proposals of Spain and Italy and was blunt: “What we are not going to accept is an ESM supplemented with a fund that is all loans, that is not solidarity.” There is the key negotiation. Sánchez finished at that point. “It is very important that the fund is made with transfers,” the Spaniard insisted. Merkel did not object sharply, although it was evident from her speech and her appeals to article 122.2 of the treaties that she was betting on loans.

The toughest so far, the Dutch Mark Rutte, is increasingly isolated . At the summit on Thursday, Finland, close to the so-called frugal, distanced itself from the sharpest line and also opened a path to understanding. The country’s prime minister, Sanna Marin, said the recovery plan should be “primarily on the basis of loans.” But like Merkel, she did not close in on the possibility that some of the future funds would be grants without reimbursements. Von der Leyen also made it clear during the summit that it will have to be a combination of both (credits and subsidies).

In the end, Charles Michel drew up a summary to avoid the tension of negotiating conclusions. But Italian Prime Minister Giuseppe Conte was not convinced.

“I want you to see that the fund is necessary and urgent,” Conte said.

“Okay, Giuseppe, I take note, tried to settle the Belgian.

—Michel, can you please read the conclusions again to see how they turned out? The Italian distrusted.

But the most striking anecdote came between Merkel and Von der Leyen, who was her defense minister. The president of the Commission stated that the proposals could be ready on May 6.

“May 6?” Merkel replied, as if something had escaped her control.

“Yes, Angela, the 6th.

“Are you sure it’s number 6?” The two proposals, the fund and the ESM?

“Yes, yes, sure.” It is a package.

-Agree. But make sure you call us first.

Laughter appeared on the screens of the various capitals. There were two possible interpretations of that “we”. Either the German was reminding her ex-minister that before moving she will have to consult with Berlin, or she was proposing that you have to speak to all the members of the Council before making the Commission’s proposals public. The answer will come shortly.