Merkel: EU common debt plan must remain ‘one’ instrument

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BERLIN (Reuters) – The European Union’s plan to contract large-scale common debt and funnel money to member states most affected by COVID-19 will create an important tool to overcome the crisis, but it must remain a one-off event, German Chancellor Angela Merkel said on Thursday.

German Chancellor Angela Merkel adjusts her protective mask at the country’s parliament, the Bundestag, in Berlin, Germany, March 25, 2021. REUTERS / Hannibal Hanschke

She met with the lower house of the Bundestag parliament before she voted to approve legislation for the EU plan. The upper house, or Bundesrat, is expected to pass it on Friday.

“In today’s debate it will again be clear that the stimulus fund is a one-off instrument limited in time and purpose,” Merkel said, adding that it was a tool “indispensable” to help overcome the economic crisis of COVID-19. .

The legislation was then passed by a large majority in the Budestag, garnering support not only from Merkel’s conservative bloc and junior coalition partner of the center-left Social Democrats, but also from the opposition Greens and Democrats. free business friendly.

Whether the EU should take on a common debt for other tasks in the future is likely to be a key topic in the campaign for the German federal elections in September.

Finance Minister Olaf Scholz, the SPD’s candidate for the next chancellor, said strengthening relations within Europe would be one of her top priorities. He hinted that he did not see the EU stimulus package as a one-time event.

PARTLY GRANTS, PART LOANS

Scholz was one of the main architects of a Franco-German plan to allow the European Commission to take on a common debt to help the member states most affected by COVID-19. This paved the way for the deal between European leaders last summer.

The European Commission will be authorized to raise up to € 750 billion in capital markets and transfer the money to member states through payments linked to jointly agreed reform and investment plans, partly under in the form of grants and partly in the form of loans.

The funds will be repaid from the EU budget over the next decades, meaning that Germany will assume around 27% of the repayment, by far the largest share of all member states.

In addition, European governments are considering a number of new EU-wide taxes that would allow the bloc of 27 countries to repay some of the borrowed money.

The disbursement of the first funds could be delayed by legal challenges in national courts.

The far-right Alternative for Germany (AfD) party and a group called the “Citizens’ Will Alliance” have announced that they will file a constitutional complaint against Germany’s ratification law.

“There is a lot to think that German President (Frank-Walter) Steinmeier will not sign the law until the Federal Constitutional Court has ruled,” said Christoph Weil, analyst at Commerzbank.

While the legal complaint is unlikely to stop the entire project, uncertainty over its implementation could increase in the coming weeks, Weil added.

A spokeswoman for the president’s office declined to comment when Steinmeier would sign the legislation.

Reporting by Michael Nienaber and Paul Carrel Editing by Gareth Jones, Simon Cameron-Moore and Frances Kerry

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