Angela Merkel Germany (Getty)

The Significance Behind Merkel’s Support for EU Economic Recovery

As EU leaders struggle to agree upon a recovery package designed to alleviate the economic effects of Covid-19, Germany has thrown its weight behind funding the bloc’s measures, whatever they may be. German Chancellor Angela Merkel told a meeting of politicians from her Christian Democratic Union (CDU) and the Christian Social Union in Bavaria (CSU) bloc on Tuesday that Germany must help its European neighbors recover from the crisis.

She was seeking consultations on an EU reconstruction program and she is open to ideas as to how it will be funded. The Bundestag would then be involved in determining how much aid will be transferred to Brussels.

A Significant Step for Germany

This is a significant step for Germany as it proves that its finances will be distributed across the EU to ensure that the impoverished states like Italy, Spain, Portugal and Greece will be bailed out no matter what happens. This is exactly what happened in 2012 when the German government had to rescue those four countries and Ireland, and again in 2015 when the Greek financial crisis was at its worst.

Merkel has understandably been reluctant to use her country’s money to finance the economies of southern European nations. Both Germany and the Netherlands have consistently opposed the use of coronabonds to aid southern Europe’s economic recovery. These bonds are a means of issuing collective debt across the 19 eurozone states.

Furthermore, it was only last month that the Chancellor told the Bundestag that they should be prepared to inject more cash into the eurozone before a meeting of EU leaders that paved the way for £470 billion of financial support.

The German Constitutional Court May be a Problem

Nonetheless, Merkel still faces opposition at home from one of Germany’s political institutions. The country’s Constitutional Court ruled on Thursday May 7 that the European Central Bank (ECB) must clarify how the EU’s bond-buying scheme to support the eurozone is “proportionate.”

Also, the Bundesbank will be excluded from joining the quantitative easing asset purchase program in three months’ time unless the ECB’s Governing Council adopts a new decision that proves that the monetary policy objectives pursued by the central bank are not disproportionate, the Constitutional Court said.

In response to the Constitutional Court’s ruling, Merkel declared on Wednesday, May 13 that the court’s decision should spur efforts toward greater eurozone integration. She added that it was clear since the euro’s inception that greater political coordination among its participant countries was essential, and threw her weight behind support for a political union.

Merkel’s Risky Decision

This is a risky move for the Chancellor. Support for her coronavirus measures has grown in recent months, with German publication Bild throwing its weight behind her plan to rescue southern Europe even though it opposed the 2010 Greek bailout.

DW reported that 72 percent of Germans surveyed by public broadcaster ARD said they are satisfied with Merkel’s government.

Meanwhile, support for the Alternative for Deutschland (AfD) party dropped by two percentage points to 10 percent. This shows that Merkel can pursue her latest measures knowing that the public largely support her.

However, as Bloomberg’s Andreas Kluth suggests, in the long-term northern European voters may resent having to pay for the south and this could lead to the rise of northern nationalist governments taking their countries out of the eurozone.

Merkel’s popularity may be high for now, but the AfD won 94 seats in the Bundestag in 2017. Their support may have decreased recently, but if the costs of the EU’s economic recovery increase over time, they could easily capitalize on this resentment.

Even if EU leaders are able to finally agree upon a final rescue package, it is clear Merkel will ensure that Germany finances it. She may have the support of the German public and the Bundestag for now, but if the EU’s measures have no effect, she may soon find it evaporates in the long-term. This will jeopardize her plans for greater monetary and political integration across the EU.