A new chapter for Europe

Is the Franco-German advance a step towards a European federal state? At least that’s what its proponents hope – citing a historical model.

Angela Merkel and Emmanuel Macron have agreed on a new financial plan.

Es were above all the supporters of a European federal state, which have not been very numerous lately, who on Monday evening were downright euphoric about the proposals of Chancellor Angela Merkel (CDU) and French President Emmanuel Macron for a European “reconstruction fund” after the Corona -Crisis responded. The crucial point of the proposal, argued the Berlin economist Henrik Enderlein, is a completely new Franco-German consensus: namely that the EU as a whole should take on large amounts of its own debt. The political signal from Berlin is for the first time, continues Enderlein, “that the EU is more than a group of nation states and has its own federal identity”.

The economist Enderlein is right: the new quality of the proposal does not consist in the fact that another half a trillion euros will be put in the European shop window for combating the consequences of corona. The decisive new thing is that the EU as a whole should be in debt for this. And since the funds generated in this way are to be passed on to needy countries exclusively as grants – and not as loans – the Union would receive a completely new financing instrument, according to the will of Berlin and Paris.

A common finance minister for common debts

“We may have experienced a Hamilton moment,” Enderlein comments on the Franco-German proposal. He is referring to a crucial stage in the founding history of the United States. After the War of Independence, the finances of the states were so shattered that they no longer seemed viable on their own. The American Treasury Secretary Alexander Hamilton pushed through a compromise in 1790: The American central government took over the debt and at the same time gained considerable authority over financial policy.

Knowledge has never been more valuable

Get free access to all articles on FAZ.NET for 30 days with F +.


Some consider this shift in financial policy competencies to be the real birth of the United States: a loose union of states became a federal state.

Anyone who speculates about the supposed “Hamilton moment” today draws a historical parallel: Because today – already now and as a result of the Corona crisis even more – the finances of the member states are in danger of shattering more and more, a European headquarters are needed, bailing out states over shared debts with very long payback times. And which establishes the European federal state, mind you, that European federal state that not even an old EU federalist like Jean-Claude Juncker considered realistic in the end. If you want this state, you have to understand Enderlein, for whom the Corona crisis is a rather happy event.

This Hamilton theory is now wishful thinking because America at the end of the 18th century is difficult to compare with Europe in the 21st century. To this day there is no European finance minister. And regardless of this, it has by no means been said that the other EU states will gather behind Merkel and Macron and really decide on their proposal in one way or another.

But of course there is also the argument behind the Hamilton analogy that a common debt also requires a common finance minister. And the question generally arises as to whether joint debt might not also – as it was in America at the time – entail or require a new distribution of financial policy responsibilities in Europe.

Merkel and Macron have left it open in which direction the discussion they have called on the future of Europe should take, including an amendment to the EU treaties. However, it is quite likely that they are not only interested in equipping the EU with new competencies in health policy, but also want to put the European budget and financial architecture on a new footing.

Incidentally, the Franco-German proposal was also due to the recent Constitutional Court ruling on the European Central Bank’s (ECB) bond purchases, and it was not without reason that ECB President Christine Lagarde immediately praised it. Because: the less the central bank has room for maneuver for these purchases, the greater the pressure tends to increase the further communitisation of debt policy.

The Franco-German proposal does not provide for joint and several liability as in the case of classic Eurobonds. And the Bundestag must approve the borrowing.

But will that be enough for the Karlsruhe judges? In any case, it is to be expected that they will also have to deal with this initiative, should Merkel’s and Macron’s proposal be adopted in this or a modified form. A plaintiff will always be found.