Several EU leaders, who arrived in Prague on 6 October for a meeting of the European Political Community, criticised Germany's plan to protect its economy from rising energy prices with a 200 billion euro stimulus package. These complaints are expected to flare up again at an even larger meeting of the 27 EU leaders, when German Chancellor Olaf Scholz (Olaf Scholz) details the plan.
Some leaders in Prague expressed concern that the domestic proposal from Europe's largest economy could create disadvantageous conditions for smaller countries and damage EU unity.
“The difficulty is that we are all adopting all sorts of economic packages to help our citizens. But because the German economy is so large, this aid could potentially create certain disruptions,” said Latvian Prime Minister Krišjānis Kariņš in Prague. “The bigger you are, the bigger your economy, the greater your responsibility,” warned K. Kariņš, adding that “we must work together to maintain a level playing field across all member states” and that “not all countries have the budget capacity to provide such aid”.
“We need to address this structurally, otherwise countries that have more money can invest more money, which harms the internal market,” said Estonian Prime Minister Kaja Kallas upon her arrival. “The problems are that every country is creating its own separate package, which means that a huge amount of money is leaving our budget and making us weaker because we are not using this money for anything else,” she said.
Belgian Prime Minister Alexander De Croo told the Financial Times that national support packages, such as Germany’s 200 billion euro plan, risk “degrading” the single market. The liberal politician argued that energy prices need to be lowered quickly, otherwise they face a decline in industrial activity and social unrest.
Dutch PM Mark Rutte supports Scholz
On the other hand, Dutch Prime Minister Mark Rutte, who traditionally leads the frugal EU countries within the bloc, supported Berlin. “I think Germany has the absolute capability and sovereignty to make these decisions, just as we make them and many others do,” he told reporters in Prague.
The criticism of Germany has also intensified calls for a joint fund to finance economic relief for member states. Portuguese Prime Minister Antonio Costa said his country would like to use the Covid-19 recovery fund.
“Before we start discussing whether a new debt is necessary, we could discuss more practically: what is available from existing EU-mobilised resources,” he told reporters. There are still 225 billion euros of unused loans from the Covid-19 recovery fund that could be redistributed. “There is money available. I don’t understand why we need another European fund,” one EU diplomat said, adding that investment in recovery funds could also be accelerated.
Hot debates
A senior EU official confirmed on 12 October that hot debates are expected between EU leaders on 14 October. The same official added that some details about Germany’s plans might possibly calm other leaders. “But it needs the leaders to discuss it,” the official added.
O. Scholz has been defending the plan for a week since its announcement. The German Chancellor said that other countries have also developed their own aid packages and that Germany is working hard to improve energy security for the whole region.
The anxiety of EU states is similar to what they feared economically at the beginning of the Covid-19 crisis: that the economic impact of the pandemic would worsen the differences between EU countries. At that time, French President Emmanuel Macron persuaded German Chancellor Angela Merkel to help create an EU-wide recovery fund.