In 1790, following the American war of independence, Alexander Hamilton proposed that federal government should take on the huge debts incurred during the struggle by individual states. It had long been Hamilton’s view that this move would be a key moment in the forging of a true United States of America. “A national debt,” he had written, “if it is not excessive, will be to us a national blessing. It will be a powerful cement of our union.”
Until now, this kind of thinking has never gained a foothold in the European Union. Despite periodic calls for deeper fiscal union, richer EU states have balked at the notion of pooling debt with weaker neighbors. After the crash of 2008, when Greece hovered on the edge of bankruptcy and a sovereign debt crisis threatened to engulf Italy, the EU went no further than the provision of emergency loans and cheap credit. The bailout money came with painful strings attached, as countries were obliged to launch deeply resented austerity programs in order to manage their growing debt mountain. The alternative — writing off debts in Hamiltonian fashion — was dismissed out of hand by Germany’s finance minister at the time, Wolfgang Schauble.
That was then. On May 18, German Chancellor Angela Merkel and French President Emmanuel Macron presented plans for a 500 billion-euro (approximately US$556 billion) EU recovery fund, which would distribute non-refundable grants (rather than loans) to the countries that have suffered most during the coronavirus pandemic. Crucially, the money would be borrowed by the European Commission (EC) on behalf of all member states, and sit within the EU budget to be agreed for 2021-27.
Photo: Reuters 照片：路透
This paved the way for EU Commission President Ursula von der Leyen, who on May 27 unveiled a 750 billion-euro fund, dubbed Next Generation EU, which will be mostly made up of grants and tied to the common budget of the EU’s 27 member nations.
This could be a watershed moment. Since the adoption of the euro, there has been fierce argument over whether a common currency should entail at least some degree of common debt. The countries of the prosperous north, led by Germany, have resisted such talk. Governments have been wary of seeing their borrowing costs rise and conscious that such a move would be domestically unpopular. But COVID-19 is challenging old taboos.
Deprived of tourism revenue and facing the sharpest economic downturn in modern times, southern Europe fears a regional meltdown. Loan packages already agreed via the European Stability Mechanism, while welcome, will contribute to unprecedented levels of sovereign debt. In these dire circumstances, both Macron and Merkel have recognized that unless the burden of reconstruction is seen to be genuinely shared, there will be existential implications for the future of the EU.
Photo: AFP 照片：法新社
On May 18, Merkel said the devastation wrought by the pandemic was of a magnitude such that it could “endanger the European Union’s cohesion.” Macron has suggested the “European idea” itself will be in danger, unless there is a step-change in solidarity between the stronger and weaker eurozone states. They are both right.
The negotiations that begin on May 27 will not be easy. On May 23, the first signs of organized opposition to the Franco-German proposals emerged, led by the so-called “frugal four” of the Netherlands, Denmark, Sweden and Austria. Eastern European countries, which have had far lower infection and death rates during the pandemic, have also balked at the idea of a jointly financed recovery fund. It is vital that the substance of the Merkel-Macron plan survives intact. Hamilton was right in thinking that debt assumption by Washington would consolidate the status of the emerging United States. The EU needs to act in the same spirit in these similarly dramatic times.
(The Guardian, with staff writer)
Photo: Reuters 照片：路透
1. Which two countries initiated the EU recovery fund? What is the size of the Next Generation EU fund, proposed by the EU Commissioner?
2. What resistance might the negotiation of the fund encounter within the EU? Why?
3. Contrasting the 2008 Financial Crisis to the COVID-19 pandemic, what has changed regarding the attitude of EU countries toward bailouts? Why might the Next Generation EU fund be a key milestone toward full European integration?
4. Why is Alexander Hamilton, one of the founding fathers of the United States, mentioned in this article? Is pre-federal America an apt comparison with the EU?
(Lin Lee-kai, Taipei Times)
1. bankruptcy n. 破產 (po4 chan3)
2. bailout money phr. 紓困金(shu1 kun4 jin1)
3. strings attached phr. 附加條件 (fu4 jia1 tiao2 jian4)
4. austerity n. 撙節；緊縮 (zun3 jie2; jin3 suo1)
5. write off a debt phr. 勾銷債務(gou1 xiao1 zhai4 wu4)
6. recovery fund phr. 復甦基金 (fu4 su1 ji1 jin1)
7. budget n. 預算 (yu4 suan4)
8. economic downturn phr. 經濟衰退(jing1 ji4 shuai1 tui4)
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