A mere two days after it was published, many European Union member states have already rejected Mario Draghi’s ultimate recommendation for making Europe more competitive: taking on more joint EU debt. The former European Central Bank chief’s 400-page report called for investing hundreds of billions of euros into the bloc’s economy—just to keep up with the U.S. and China.
It is becoming clear that implementing the suggestions from the report will be near impossible. On Wednesday, September 11th, Friedrich Merz—a prospective German chancellor and the leader of center-right opposition party the Christian Democratic Union (CDU)—vehemently opposed the plan during a parliamentary debate, declaring
I want to say this very clearly, now and in the future, I will do everything I can to prevent this European Union from spiraling into debt.
Draghi’s report, which is expected to serve as the basis of the incoming European Commission’s new economic reform plan scheduled for next year, claimed that the EU’s economy will need around €800 billion in annual additional investments to raise its long-term competitiveness or be condemned to a “slow agony” in the 21st century.
Raising and properly investing such a massive sum would of course require the EU to take out ‘permanent’ joint loans and agree to further economic centralization by transferring more powers to Brussels.
Joint borrowing is not an entirely new idea, as the EU has already resorted to taking on common debt within the €800 billion “Next Generation EU” scheme, which was meant to provide EU member states’ pandemic-hit economies with quick relief funds, and then be paid back from the common budget later.
However, according to Merz, that instrument was but a one-time “exception” adopted during an emergency and cannot be made a permanent feature of the EU economy.
“What Mr Draghi proposed … is not covered by the current provisions of the European treaties. We have a ban on borrowing in Europe,” Merz reminded the Bundestag:
I can only say on behalf of my group [CDU/CSU] and also on behalf of the European People’s Party [EPP]: I will do everything to prevent Europe from going down the path of such debt.
It will be interesting to see how this debate will play out in Brussels. Even though Merz talks like he’s representing the entire EPP, the southern European members of the group are generally in favor of the proposal, while it’s only the more frugal Nordics who remain staunch opponents. The CDU is the largest member but holds only one seat more than the Spanish Partido Popular which could easily assemble a larger force to change the group’s general approach, should it choose to.
Furthermore, this could also prove to be one of the hardest challenges for Ursula von der Leyen, especially given that the Commission president also hails from CDU and EPP and rarely moves against the wishes of the European Parliament’s largest group. Unfortunately for her, she commissioned the report and promised to act on it in one way or another.
