Former Italian Prime Minister Mario Draghi called on the EU to continue borrowing money for key investments in a report published yesterday, a proposal that has divided Germany’s ruling coalition and sparked opposition from the Netherlands.
Call Maria Draghiegofor the EU to continue issuing common debt, deepened divisions in the already quarreling German government and drew sharp criticism from the Netherlands. It shows that some of the Italian technocrat’s proposals may prove politically unworkable.
Draghi, former President of the European Central Bank, said in his much-anticipated report on the future of EU competitiveness published yesterday (9 September) that “if the political and institutional conditions are met”, Europe should continue to “build on the model” of its €806.9 billion COVID-19 recovery plan.
Under the NextGenerationEU post-pandemic recovery fund, EU countries receive grants and loans to implement declared investments. The fund is financed by debt raised jointly by EU member states. Grants and loans will be paid out until August 2026.
Traditionally “frugal” EU countries that favour austere fiscal policies, such as the Netherlands and Germany, are strongly opposed to extending the recovery fund beyond its scheduled expiry date or taking on new debt for other purposes.
“Joint EU borrowing will not solve structural problems: companies have no shortage of subsidies,” the German finance minister wrote on Monday on X. Christian Lindnerleader of the pro-business liberal FDP.
In his opinion, enterprises are “mainly limited by bureaucracy and a planned economy”. – They also have difficulties with access to private capital. We need to work on this – assessed the minister.
The Vice-Chancellor has a completely different opinion Robert Habeck from the Green Party, who described the Draghi report as “a call to action for the new European Commission and the EU as a whole.”
“I am pleased to declare my support” for the report’s proposals, he said in a statement.
Habeck, who is also Germany’s economics minister, particularly praised the emphasis on innovation and the mobilisation of public and private investment.
In the government Olaf Scholza There is an ongoing dispute between individual parties in the ruling coalition over next year’s budget.
Lindner, known for his hawkish approach to fiscal policy, has repeatedly pushed for sharp cuts in public spending to meet the debt limit in the constitution. However, the spending cuts are opposed by the two other governing parties, the Greens and the SDP.
The latest dispute is largely a consequence of the disastrous results of all three coalition parties in the recent regional elections in eastern Germany, in which the far-right AfD and the far-left Sahra Wagenknecht Alliance (BSW) achieved historic success.
“More money is not always the solution”
The Draghi report met with a clearly negative reaction from the four-party Dutch government.
– More money is not always the solution – said the Dutch Finance Minister Eelco Heinenanother well-known fiscal hawk, a member of the conservative People’s Party for Freedom and Democracy (VVD), was quoted by the Dutch news agency ANP.
A similar assessment was expressed by the Minister of Economy Dirk Beljaartsoriginating from the far-right Freedom Party (PVV) Geert Wilders.
– Additional public investment is not a goal in itself, he said.
– They are only necessary in the event of unfair competition or market failures – added the minister.
The Draghi report, including the proposal to significantly increase investment at EU level, has also been criticised by some EU diplomats.
“The discussion on further EU investment relates to the next multi-annual budget,” one diplomat told EURACTIV. The current seven-year budget of €1.2 trillion will expire in 2027.
Spain and France support Draghi’s ideas
However, Draghi’s proposals were supported by some countries, including France and Spain.
Bernand GuettaMEP of the Renaissance party of the President of France Emmanuel Macronpraised the report’s “French approach” to “abandoning taboos on common defence, industrial policy and common debt”.
– We must call on the Member States, the European Parliament and the future Commission to fully embrace the idea of industrial policy and joint investments, he told EURACTIV.
Guetta also called on member states such as Germany and the Netherlands to “open their eyes and end their ideological approach” to joint EU debt.
But he admitted that France, which was formally reprimanded by the European Commission earlier this year for high levels of public spending, “is not the best country to promote this narrative and convince other member states.”
– France is indeed not the most credible member state when it comes to talks on joint financing of EU investments, because it is in the red with its own finances – he said.
Draghi’s proposals were also supported by the Spanish Finance Minister. Carlos Bodywhose country is one of the main beneficiaries of the EU Reconstruction Fund.
“Like Draghi, we believe that part of the required financing must come from the EU. We agree with the need to work on a permanent EU common debt programme,” he told the Financial Times.
