Tensions are flaring over the new irresponsible EU big spender: Germany – POLITICIAN

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What a difference a decade makes.

Ten years ago, when Europe was grappling with the eurozone crisis, Germany was leading the drive for austerity. Now the rest of Europe is infuriated by Germany’s heavy spending on energy subsidies that they fear will exacerbate the continent’s politically explosive gap between rich and poor. It does not help these mounting tensions that it was Berlin’s erroneous dependence on Russian gas that contributed in the first place to trigger the bloc’s energy crisis.

Dissent is growing in the EU, particularly among heavyweights like Italy and France, over Germany’s massive € 200 billion package announced last week to cushion consumers and businesses from the full effects of the energy crisis. These grievances are now likely to flare up at Friday’s EU summit in Prague as leaders address the issue of rising energy costs and their economic ramifications.

“Germany has shown a big middle finger to the rest of Europe with this package,” said an EU official. “This has really raised the temperature with other countries.”

Germany’s deep pockets are a long-standing bone of contention that also fueled problems during the coronavirus pandemic, when countries poured billions of bailout funds into their economies. The criticism is that Germany’s enormous financial firepower allows it to save its economy as poorer nations collapse, opening large divisions in the single market as German companies gain a state-funded advantage over rivals elsewhere.

Nations say Germany bears the burden of responsibility to show solidarity and not just take care of itself, not least because of Berlin’s role in helping Gazprom establish dominance in Europe and because research by Germany of new gas supplies is driving up prices for everyone. “The Germans are more concerned about the gas supply than the price, but for the other 26 countries this is not the case,” Energy Minister Roberto Cingolani told Rai TV on Sunday.

The Minister of Energy Roberto Cingolani | Stefano Guidi / Getty Images

In a pat on the wrist for Germany’s “go-it-alone” approach, the European Commission on Monday also invited countries coordinate their rescue measures and avoid jeopardizing the single market. “Actions taken at national level have important spillover effects on other member states, so a coordinated approach at European level is more crucial than ever,” EU Economy Commissioner Paolo Gentiloni said Monday after a meeting of finance ministers.

Outgoing Italian Prime Minister Mario Draghi also issued a rare rebuke to Germany. “We cannot divide based on our fiscal room for maneuver, we need solidarity,” he said last Thursday.

Guido Crosetto, co-founder of Fratello d’Italia, the party that should lead the next Italian government, said on Twitter that Germany’s decision “not agreed, not shared, not communicated, threatens the logic of the Union at the root” .

Paris also looked annoyed.

“It is essential to maintain a level playing field between euro area member states and between member states in general,” said French finance minister Bruno Le Maire, on Monday to a meeting of euro area finance ministers in Luxembourg. “If there is no consultation, if there is no solidarity, if there is no targeted support for businesses, if there is no respect for a level playing field, we risk the fragmentation of the eurozone”.

To add fuel to the fire, the fact that Germany is blocking calls for an EU-wide gas cap to tackle the energy crisis is not strengthening its cause among other countries.

Old habits die …. quickly

Having been the face of rigid fiscal righteousness, insisting that austerity measures were part of the bailout conditions for countries like Greece, Portugal and Ireland during the eurozone crisis, Berlin is now chairing a spending package to be brought in. ‘mouth watering. The German Federal Court of Auditors also criticized the financing of the plan, as first reported by POLITICO, which appears to defy decades of German fiscal conservatism.

The announcement of the new package comes just weeks after German Finance Minister Christian Lindner told POLITICO in an interview that Germany and the EU must return to strict fiscal discipline.

But when it comes to energy bounty, Lindner defended the move in Luxembourg on Monday. “The measures are proportionate to the German economy and up to the year 2024, and in line with what others in Europe are doing,” she said.

Technically, the spending will be classified in a COVID-era economic stabilization fund, so that it is compatible with Germany’s national debt rules.

Germany’s decision to unveil an ambitious support package is reminiscent of the start of the COVID pandemic more than two years ago, when then Chancellor Angela Merkel wanted to push ahead with plans to bolster her own economy. This led to allegations that Berlin was distorting competition across Europe because not all EU countries could afford such measures. Eventually, the EU reacted by setting up its historic € 750 billion coronavirus recovery fund, but the German government has repeatedly insisted that it was a “one-off” solution that will not repeat itself.

Former German Chancellor Angela Merkel | Pool photo by Michael Kappeler / AFP via Getty Images

Then, as now, Germany had the fiscal space to support its economy. Others don’t.

As French Commissioner Thierry Breton wrote on Twitter: “While Germany can afford to borrow EUR 200 billion on the financial markets, some other Member States cannot. We must urgently reflect on how to offer Member States – which do not have this fiscal margin of maneuver – the possibility of supporting their industries and activities ”.

Little sympathy for the Germans

The upcoming reform of the EU’s Stability and Growth Pact looms over the increasingly contentious debate over Germany’s newly discovered debauchery. The pact, the foundation of the EU’s fiscal surveillance system, came under pressure during the pandemic. But the Commission is now ready to announce a renewal of the system, which will come into effect from 2024.

While the two pillars of the EU’s financial regulation will remain – that countries must adhere to a government deficit of 3% of gross domestic product and a debt-to-GDP ratio of 60% – the pact will include a new element of flexibility that seemed anathema a decade ago. In particular, the Commission proposes to remove the obligation for countries with debt levels above 60 per cent of GDP to reduce their debt by 1/20 each year.th. Countries would also be given more time to reduce their debt levels.

Much of the political momentum for the revision of the rules of the Stability and Growth Pact has come from Paris. Last December, French President Emmanuel Macron and his Italian counterpart Mario Draghi called for the reform of the EU budget rules to reflect “a new growth strategy” and ensure “sufficient spending for the future”. The incoming Italian government is expected to echo Draghi’s stance, while countries that have waved the austerity flag, such as the Netherlands, are also tempering their demands for fiscal prudence.

There are also flashing warning signs about the state aid implications of the German bumper energy blast. The European Commission has stressed that it is up to any Member State introducing the measure to determine whether the expenditure constitutes State aid and to notify the Commission. But a Commission official also stressed the importance of a level playing field and “horizontal rules applicable to all”. A temporary crisis framework is in place, allowing flexibility under state aid rules to allow countries to help shoulder the economic burden created by the war in Ukraine.

Margrethe Vestager, the Commissioner responsible for competition policy, pledged to review the state aid framework this month to enable countries to tackle the energy price crisis. It is not yet clear whether the Berlin package will be assessed in the new framework, currently under consultation between Brussels and EU countries, or in the old one.

Tobias Schwarz / AFP via Getty Images

The matter is likely to be resolved at an EU summit later this week, when leaders will discuss how to devise a European-wide response to the energy crisis and address the economic fallout from the war in Ukraine.

As the largest economy in Europe, what happens in Germany matters. But Berlin may find it has limited sympathy from other EU countries at a time when many believe a united response is the only way to tackle the huge economic challenges expected this winter.

Andrea Ferrazzi, senator of the Democratic Party, was categorical on what is at stake.

He observed on Facebook: “If it continues to move in this direction we will no longer have a united Europe, but a hegemony of the strongest counties, with Germany first, which would weaken not only the EU but all the others”.

Barbara Moens contributed to the reporting

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