Merkel issues stark warning on urgency of EU coronavirus recovery fund

Angela Merkel has urged fellow EU member states to reach agreement on the bloc’s future budget and the post-coronavirus recovery fund before the summer break, saying there was an urgent need to show “solidarity” with those countries worst affected by Covid-19.

“The pandemic shows us how vulnerable Europe is,” the German chancellor told MPs on Thursday. “Therefore I want to stress to you that cohesion and solidarity in Europe were never as important as they are today.”

Ms Merkel made the appeal in a speech to the Bundestag setting out Germany’s priorities for the rotating presidency of the EU, which it will take over at the start of July. She said overcoming the coronavirus crisis would be the “leitmotif” of Germany’s presidency.

The pandemic is set to plunge the EU into the worst recession in its history, and member states are currently discussing a European Commission proposal for a €750bn fund to help pull the bloc back from the brink.

The idea draws heavily on a plan drafted last month by Ms Merkel and Emmanuel Macron, the French president, which envisages the commission borrowing on the capital markets and then passing the money on in the form of grants to countries worst affected by the crisis.

Ms Merkel said a failure to take drastic action to mitigate the economic disruption caused by coronavirus would only help populist forces opposed to the European project.

“Anti-democratic forces, radical, authoritarian movements are only waiting for economic crises in order to misuse them politically,” she said. “They are only waiting to incite social fears and spread insecurity.”

EU measures to cushion the economic fallout of the pandemic were therefore a “political instrument against populists and radicals”.

A group of EU members — the so-called frugal four — is opposed to the commission’s recovery fund proposal, saying the aid money should be handed out in the form of loans rather than grants.

Ms Merkel acknowledged that the “starting position is anything but easy”. But she said she hoped that the EU member states would nevertheless reach agreement on the recovery fund, and on the EU’s budget — known as the multiannual financial framework — before the summer break.

That would allow Germany to push both through the European Parliament during its presidency of the EU and give national legislatures time to ratify all the decisions setting up the recovery fund by the end of the year.

“Then both the MFF and the recovery fund, which belong together, would be able to start taking effect . . . at the start of 2021,” Ms Merkel said.

The chancellor said the pandemic had “exposed how fragile the European project is”. She said countries, including Germany, had gone their own way at the start, and had often behaved “irrationally”.

The crisis had revealed Europe’s heavy reliance on countries outside the bloc for medicine and products such as protective masks, and exposed weaknesses in the way the EU procures, stockpiles and distributes medical equipment. It had also deepened pre-existing economic inequalities between member states.

“The medical and economic consequences of the crisis are deepening the imbalances in the European community,” Ms Merkel said. That is why the EU now faced the urgent task of strengthening convergence. “We must not allow the economic prospects of the EU member states to drift apart as a result of the pandemic,” she said.

Ms Merkel said Germany’s EU presidency would concentrate on climate policies, digitisation and on ensuring that the EU took on more global responsibility. Berlin would also seek to ensure that the EU spoke with “one voice” on China, she said.