To address the twin economic and public health catastrophes, member states have fallen back on their own resources, resurrecting border controls and accusing one another of insufficient solidarity. Even the Constitutional Court of pro-European Germany struck a note of discord this month by purporting to overrule the European Court of Justice and invalidate a multitrillion-dollar European Central Bank (ECB) program, in place since before the crisis, that enables financially weaker E.U. countries to borrow at low interest rates.
Not a moment too soon, President Emmanuel Macron of France and Chancellor Angela Merkel of Germany have unveiled an initiative to shore up the European project. At the heart of their proposal, announced on Monday, is a new financial mechanism whereby all 27 E.U. member states will mutually guarantee $550 billion worth of bonds, the proceeds of which will finance economic recovery in states such as Spain and Italy that have been especially badly hurt by the crisis. Crucially, the money will be delivered as grants, not loans, to avoid further indebting these already deeply indebted countries.
For Germany, which would take the largest portion of the financial risk, this represents a bold departure. It has long opposed underwriting directly the budgets of its less fiscally disciplined southern neighbors, whose free-spending ways German voters deeply resent. Such concerns underlie the German court’s recent ruling against ECB bond-buying (which has yet to take effect), and Ms. Merkel can expect plenty of opposition to her decision now, which contradicts her 2012 statement ruling out debt mutualization “in my lifetime.” Fiscally conservative E.U. member states, any one of which could veto the Franco-German plan, are raising objections.
They should drop them. Ms. Merkel has pragmatically recognized that the alternatives would be worse. Endless economic stagnation in the European south hurts companies in the north, especially Germany’s exporters. More important, in political terms, is the specter of more anti-European populism in Italy — and beyond. As Mr. Macron has been arguing since his election in 2017, the European Union must do more to prove its tangible value to restless electorates, lest Brexit-style sentiment spread and Russia or China gain influence. Ms. Merkel, after much hesitation, has accepted that argument.
The Trump administration wavers between indifference and hostility to the European Union, despite the strong U.S. interest in a stable, prosperous Europe. Mr. Macron and Ms. Merkel have accepted the fact that Europe is on its own as never before since World War II, and must act accordingly.