COVID-19: "Europe will weather this crisis together"

European Union – Franco-German initiative – Interview given by Mme Amélie de Montchalin, Minister of State for European Affairs, attached to the Minister for Europe and Foreign Affairs, to the weekly magazine Le Point

Paris, 25 May 2020

Q. – Are we to expect a diluted version of France and Germany’s ambition?

THE MINISTER – We must see this Franco-German initiative not solely in terms of its budgetary aspect but as a “reformist” initiative for Europe. We’ve had a lot of debates about how this crisis must ensure we move beyond what we normally do when putting together the European budget. There’s no room here for disagreements and petty calculations, which would take us further away from that goal.

We’re offering a vision of Europe. Now there’s a second stage: the European Commission must be equal to the crisis and shoulder its responsibilities. The Commission has a mandate, in the treaties, to promote the European interest. The aim mustn’t be to find the median point or the lowest common denominator between member States. The Franco-German proposal is, I repeat, much more than an agreement half-way between German and French interests. It’s a vision of what Europe must be over the coming 20 or 30 years in order to remain relevant in a world where major challenges like the ecological climate transition await us. This declaration is in fact the starting point for a new Europe in the image of the Schuman Declaration of 9 May 1950. It’s the first time for a long time that France and Germany have drawn up a shared narrative which is truly European, which traces a path towards a common destiny that isn’t just the combination of their interests at one moment. This narrative marks out the need for genuine European sovereignty and solidarity.

Q. – Why is this possible now and not in 2008, when the financial crisis split Europe between North and South?

THE MINISTER – The health crisis is different in nature from the 2008 crisis. The crisis today hasn’t been created by a lack of reforms. It’s a crisis unleashed by an external factor, the spread of a virus, which requires us all to take back control of our common destiny simultaneously. Everyone has realized two things: firstly that we’re extremely dependent on the outside world, and secondly that we’re all interdependent on one another internally.

This internal market interdependence, which is the bedrock of our prosperity, can, if we don’t take full responsibility for it, become a weakness. This concept of shared sovereignty, of European sovereignty pledged by the French President emerges stronger because of the European weaknesses the coronavirus crisis has brought to light. But no country has the means to cope alone. When Chancellor Angela Merkel repeats that there’s no “strong Germany in a weak Europe”, it’s an argument we’ve pushed a great deal together with the Germans, but also with all the other member States.

Q. – However, the Netherlands, Austria, Denmark and Sweden, nicknamed the “frugal four”, don’t want to pay for Italy, Spain or France… What do you say to them?

THE MINISTER – The frugal countries aren’t on an island. The exporting model that makes them strong and [underpins] their narrative of “we’re strong, competitive and you only have to reform” doesn’t stand up to analysis, because whatever they say, they’re dependent on the good economic health of the other European countries.

Together with Germany, we’ve managed to make progress by understanding that this interdependence isn’t a constraint but a strength. I ask the frugal countries to realize that we must go beyond a debate about figures and financial engineering. The fact that 70% of the Netherlands’ industry is exported within the internal market is proof of that. They can put all the money they want into their national recovery plans; unless they have customers and suppliers elsewhere in Europe, it won’t work.

Another example, the Swedes: the various studies by the IMF, the Commission and the OECD predict a decline in the Swedish economy of 6% to 8% of GDP. So they won’t have a much less significant recession than other Europeans, because their customers and suppliers are in Europe… Consequently, we must ensure that this interdependence which is the source of our prosperity lives on as a strength. Germany has understood that it must shoulder its responsibilities. Chancellor Angela Merkel has clearly chosen this path.

Q. – The Dutch Prime Minister, Mark Rutte, is in a complicated situation in the Netherlands: his government includes Eurosceptic forces, his parliamentary majority is hanging by a thread and he’s facing a far right which is feeding off talk along the lines of “we’re paying for those in the south”. Moreover, he has a general election next year. How can he accept the Franco-German proposal?

THE MINISTER – The negotiation isn’t over. We share the same vision of Europe’s future with the Netherlands. Put simply, their conclusion ultimately is that Europe needs loans and not budget aid. Let me repeat: the [economic] upturn in the Netherlands won’t happen without a mutually supportive European recovery, and Mark Rutte will need a pick-up in the economy again to get re-elected. Of course we need national recoveries, but that won’t be enough. Our major industrial sectors won’t pick up again, yesterday’s jobs will be weakened and tomorrow’s won’t exist unless prosperity is shared in Europe.

In the coming days, we must succeed in demonstrating that what’s at stake isn’t the national contribution of any particular country to the European budget, but the vitality of the economic project which has made us prosperous.

Q. – The Franco-German initiative is also calling for the birth of a “Health Europe”...

THE MINISTER – The Franco-German initiative is actually a Schuman Declaration for health. We’re proposing to build up medical supplies so that in the event of a crisis, no one reacts to the detriment of others. Research, medicines and medical equipment must be at least shared or, at any rate, we must know everyone’s situation so that, in the event of difficulties, it’s possible for resources to be shared quickly.

On the climate, our interdependence is obvious here too. No one will stop global warming in their own little corner. When we say we’ve got to increase our targets for reducing greenhouse gas emissions by 2030, we mean together. Otherwise we’re going to recreate imbalances between us which will lead to us undermining one another. If we don’t do anything in a coordinated way, one will be better on mobility, another on energy, but ultimately that doesn’t work.

Finally, the last part of the Franco-German declaration – which talks about adapting competition rules, the State-aid framework and also about social convergence – is a key element regarding our vision of the world. This crisis is probably accelerating a process which the various countries were engaging in and goes well beyond a short-term recovery plan. It’s what gives us our European identity and sovereignty when up against the rest./.

European Union – Interview given by Mme Amélie de Montchalin, Minister of State for European Affairs, attached to the Minister for Europe and Foreign Affairs, to Europe 1

Paris, 18 May 2020

Q. – This recovery plan has been announced by Emmanuel Macron and Angela Merkel, with €500 billion of budget allocations. Of course, this recovery plan is substantial – we’ll get back to it in detail – but is that it? Is the European Union going to get into debt for the first time?

THE MINISTER – What we can see above all is that this crisis is revealing our interdependence. No country has experienced the virus alone, no country can get over it alone, and what France and Germany are saying this evening is that we need a solution that can benefit every State, in other words that we can multiply, be much more effective than, what each country is currently doing in terms of recovery and protection. Together we must be able to support the most affected regions, sectors, in each country, and therefore take responsibility for Europe being useful but also for it acting swiftly. And so that’s the purpose of this initiative, which is decisive, which is essential, and [it’s also] to ensure Europe picks itself up together and can set off again with an economy that we hope prospers and a social crisis that we hope is as limited as possible.

Q. – So €500 billion directed to the regions and sectors most affected by the crisis, that’s good, but is it enough to protect European countries from recession and rival, for example, China and the United States?

THE MINISTER – What’s certain is that if we don’t make that effort, Europe won’t count any more. If we want Europe to be a power, we must have the means to be credible. You know, only a few weeks ago, what was announced this evening seemed totally unattainable. Since March we’ve been working with eight countries, trying to further this Franco-German dialogue. The Germans started from a very distant position; they weren’t in this position from the outset. I think this crisis has shown them two things: firstly, that Germany basically depends on its neighbours, its suppliers…

Q. – On France?

THE MINISTER – Of course German businesses know that their suppliers, their customers, are everywhere in Europe, including France, that Germany can’t restart alone and that however big they are, the recovery can’t work [solely] with a German plan because if Germany’s suppliers and customers themselves don’t restart, it doesn’t work. So I think this interdependence can be seen. What Germany has also seen is that, like the other European countries, it’s dependent on China and other countries for its masks and medical equipment. And so this interdependence we have means that we want and need to restart together.

Q. – Together of course, of course that’s very laudable, and of course it’s the first time and it’s a massive transfer of resources from the strongest economies to the most affected areas, of course. But are we still going to have to overcome the reservations, particularly from some countries in the north, for example?

THE MINISTER – What’s certain is that when France and Germany reach agreement, it doesn’t mean the other 27 agree immediately agree. However, what is certain is that unless you have agreement between France and Germany, you can’t move Europe forward.

Q. – That’s the starting point.

THE MINISTER – That’s why it’s decisive; that’s why it’s a starting point. We’ve really built a lot of alliances around us, and so it’s not only France and Germany that agree on this. You’ll see in the coming days that the various players are going to lend their support. The proposal…

Q. – What point will France not negotiate on? Because there will be a lag period, obviously, but what won’t we negotiate on, for example?

THE MINISTER – What’s key for us today is that there must indeed be transfers between countries. The European Union isn’t just a bank that makes loans, where everyone gets back what they previously gave it. It’s genuine, concrete solidarity – like in a country, in fact. Today in France, we’re helping the most affected sectors and regions. Well, at European level we must do the same thing: pool resources and really enter into this spirit of concrete solidarity. We won’t let go of that. And we won’t let go of this idea of sovereignty, either. Today we can’t take on board being European and let ourselves be buffeted between the United States and China. We need, in certain industrial sectors – health of course – to assert what we are, the technologies we want to choose, and to produce at home things that are essential.

Q. – But how? Of course we’d love to have industrial sovereignty and also be independent in terms of health, but how can we make the European Union self-sufficient?

THE MINISTER – There are several things: first of all we must have research, we ourselves must have the innovation enabling us to be in the vanguard and not depend on others. That’s the first building block. The second block is being capable of bringing production back to Europe; that means we must look at taxation, we must look at the ability to help businesses set up in Europe, and that requires money. And part of the €500-billion plan we’re talking about will be used to fund that return. Next, there are also issues around protecting our investments; that means we mustn’t let companies – especially key ones for health or for certain technologies – be bought by American or Chinese or I don’t know what other [companies?]. So we must protect our strategic investments, we must bring back production, and we must have research and innovation.

Q. – We’ve seen the example, you’re referring to Sanofi. We saw what happened all last week: a great deal has been said about Sanofi, a French company from the start, with more and more shareholders, which tipped the balance in the end.

THE MINISTER – In the Franco-German agreement, there’s this idea that a “Health Europe” must exist; in other words, we want certain treatments, certain vaccines to be outside the laws of the market. It’s a global public good; together with the President we’re fighting on this, along with many non-European partners too, to say that in certain areas, yes, public money is needed, so that capital-intensive rationales, rationales based on speculation no longer apply. And so this Franco-German initiative also exists to make it known that at the heart of Europe, the two largest countries are saying we’re willing to put money on the table...

Q. – Exactly, Angela Merkel spoke about changing certain treaties. What could that mean, for example? We haven’t heard Emmanuel Macron being very clear about this. What could that mean, what could that cover?

THE MINISTER – There are issues to do with health, today, this doesn’t come within Europe’s remit, so it’s true that if we want Europe to do more, we also need to give it the means to do so. I don’t know if we should start with the idea that we’re going straightaway to change the treaties. What’s already certain is: “what can we do right now with the treaties we’ve got”, looking as far ahead as possible to see where we can go, and if the treaties are an obstacle, well, in that case, we’ve got to ask ourselves questions. We’ve got to be clear, we’ve got to be honest, I think there are things we haven’t done well in this crisis and that we’ve got to do a lot better in terms of reaction, prevention and preparedness. There are also things which have worked well, because, given the scale of the challenges, we reacted – I’m thinking particularly economically, with the ECB, with many useful things; it means we’ve got to build, and perhaps in the treaties, we’ll have to go further to reinforce what has worked well and change what has prevented us from acting as quickly as we needed to.

Q. – Did we flirt with the worst-case scenario? From that I take it that the EU risked breaking up had there not been, in the end, this COVID-19 crisis which perhaps brought to light rather too much indifference from Germany, and risked bringing down partners which its economy needs the most. We saw that, it was blindingly obvious.

THE MINISTER – There was a very powerful moment of truth, in that it was perhaps the first time in years when we were all affected by something we weren’t responsible for. No one is responsible, no bad policy accounts for one country catching the virus more virulently than others. And so what matters for me is that the moment of truth isn’t about whether Europe exists or not, above all it’s about whether it’s useful. Is it capable of doing things which are useful for citizens, useful for employment, useful for businesses, useful for our health? The battle we’ve been waging alongside the President for three years now is really a battle about usefulness. When we talk about sovereignty, we aren’t being theoretical, we’re dealing with something concrete – how we produce in Europe, how Europeans can use European goods, and how we don’t allow ourselves to be buffeted between China and the United States./.

European Union – French-German initiative for the European recovery from the coronavirus crisis¹

Paris, 18 May 2020

The current crisis is unprecedented in the history of the European Union. No life, no workplace, no business remains unaffected from this global shock. While our societies and our economies are in the process of finding their way out of the lockdown, uncertainties remain extraordinarily large. Our goal, however, is clear: Europe will weather this crisis together and come out of it stronger than before. Achieving a sustainable recovery for the EU guides our joint efforts. We, France and Germany, are fully committed to live up to our responsibility for the EU and we will help pave the way out of the crisis.

To this end, more than ever, we need to benefit from the strength of acting together as Europeans and to join our forces in ways we have not used before.

We will also need to carry out an in-depth reflection on the lessons we need to draw from this crisis. The Conference on the Future of Europe will offer an opportunity to open a large democratic debate on the European project, its reforms and priorities.

France and Germany propose the following measures.

1. Developing our strategic health sovereignty with an EU “Health Strategy”

Our response to the current crisis and to future health crises should build upon a new European approach based on strategic health sovereignty. We strive for a strategically positioned European healthcare industry which will, in full respect of the member States’ responsibility for their social security and healthcare systems, upgrade the European dimension of healthcare and reduce EU dependency. We shall therefore:

• increase European capacities on research and development for vaccines and treatments, as well as coordinating and financing at the international level (ACT-A initiative), with the short term goal to develop and produce a coronavirus vaccine within the European Union, ensuring its global access;

• establish common strategic stocks of medicines and medical products (protective equipments, testing kits etc.) and encourage production capacities of these products in the European Union;

• coordinate European procurement policies regarding future vaccines and treatments (eg. production and stockpiling of future potential vaccines), in order to speak with one voice with the pharmaceutical industry and secure more effectively European and global access;

• set up an EU “Health Task Force” within the European Centre for Disease Prevention and Control (ECDC) and mandate it, with national health institutions, to develop prevention and reaction plans against future epidemics;

• establish common European standards for health data interoperability (e.g. harmonizing methodology to have comparable statistics on cases in epidemics).

2. Setting up an ambitious “Recovery Fund” at the EU level for solidarity and growth

To support a sustainable recovery that restores and enhances growth in the EU, Germany and France support an ambitious, temporary and targeted Recovery Fund in the framework of the next MFF, boosting a frontloaded MFF during its first years. Given the exceptional nature of the challenge of the COVID-19 pandemic for economies across the EU, France and Germany propose to allow the European Commission to finance such recovery support by borrowing on markets on behalf of the EU under the provision of a legal basis in full respect of the EU Treaty, budgetary framework and rights of national parliaments.

• The Recovery Fund of €500 billion will provide EU budgetary expenditure for the most affected sectors and regions on the basis of EU budget programmes and in line with European priorities. It will enhance the resilience, convergence and competitiveness of the European economies, and increase investments in particular in the digital and green transitions and strengthening research and innovation.

• The Recovery Fund financing will be targeted at the challenges of the pandemic crisis and its aftermath. It will be an extraordinary complementary provision, integrated in the own resource decision, with a clearly specified volume and expiry and linked to a binding repayment plan beyond the current MFF on the EU budget.

• A swift agreement on the MFF and Recovery Fund as a package is necessary to address the major EU challenges. The negotiations will build on the progress reached until February. We will strive to make the budgetary effort related to coronavirus-crisis available as soon as possible.

• This recovery support complements national efforts and the package agreed by the Eurogroup, and will be based on a clear commitment of member States to follow sound economic policies and an ambitious reform agenda.

• Improving the framework for fair taxation in the EU remains a priority, in particular by introducing effective minimum taxation and fair taxation of the digital economy within the Union, ideally based on a successful conclusion of the OECD work, and establishing a Common Corporate Tax Base.

3. Speeding up the green and digital transitions

Now is the time to boost the modernization of European economy and its business models. In this spirit, we reaffirm the European Green Deal as the EU’s new growth strategy and a blueprint for a prosperous and resilient economy on the way to carbon-neutrality by 2050. At the same time, we must accelerate digitalization with the aim of transforming the new dynamics experienced during the crisis into sustainable digital progress and digital sovereignty. To this end we shall:

• increase the EU targets of emission reduction in 2030 in synchrony with a package of efficient measures to avoid carbon leakage; the proposal announced by the Commission on a carbon border adjustment mechanism must be supplemental to existing instruments and in line with WTO law. State-aid rules should be reviewed in light of more ambitious climate policy and carbon leakage;

• support the introduction of minimum carbon pricing in the EU Emissions Trading System (ETS) and work towards the prospective introduction of a cross-sectoral European ETS;

• set up for each sector a green recovery road map, including, where appropriate, climate and environmental targets and/or conditionalities;

• accelerate digitalization, i.a. by roll-out of 5G, efforts for secure and trustworthy infrastructures and cybersecurity technologies, digital identity management, an enabling framework for AI, as well as a fair EU regulation for digital platforms.

4. Enhancing EU economic and industrial resilience and sovereignty and give a new impulse to the single market
The strong integration within the single market is a guarantor of our welfare. A restart of the European economy and adapting it to the challenges of the future requires a resilient and sovereign economy and industrial base as well as a strong single market. Open markets, free and fair trade are a crucial part of the solution. We therefore shall:

• support the diversification of supply chains through the promotion of an ambitious and balanced free trade agenda with the WTO at its core and including new initiatives, inter alia on trade of health products, develop our anti-subventions mechanisms, ensure effective reciprocity for public procurement with third countries and strengthen EU and national investment screening towards non-EU investors in strategic sectors (including health – pharmaceuticals, biotech etc.), while at the same time encouraging investments (re)located in the EU;

• adjust the Commission’s industrial strategy to the recovery and in particular modernize the European competition policy by accelerating the adaptation of State aid and competition rules and speeding up the implementation of IPCEIs;

• ensure swift return to a fully functioning internal market and deepen it further by a new road map to create a fully integrated market in key areas (esp. digital, energy, capital markets) with clear milestones and an accelerated legislative agenda;

• ensure the full functioning of the Schengen area, improving coordination obligations between member States in times of crisis and strengthening common external borders;

• reinforce social convergence and speed up the discussion on the EU framework for minimum wages adapted to national situations./.

¹Source of English text: German Foreign Ministry.

Published on 26/05/2020

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