The Brief — German tax hubris –

Last week’s announcement that Berlin planned to invest 200 billion euros in combating the effects of sky-high inflation surprised many in Brussels. The very country that has advocated fiscal prudence will now invest the largest amount of any EU country to support its economy.

However, it seems that Germany did not anticipate the backlash it received. Some of Europe’s biggest member states – including France, Italy and Spain – have come forward to criticize Germany’s DIY approach that had not been coordinated with Berlin’s allies.

The European Commission also intervened, with the two commissioners for the economy and the internal market, Paolo Gentiloni and Thierry Breton, describing the decision as “questionable”.

It seems almost ironic from history that the very country that opposed any relaxation of EU debt rules is now relying on the exceptions made during the pandemic.

While the self-proclaimed “friendly hawk” German Finance Minister Christian Lindner repeats almost as a mantra that the extra spending will not exceed the constitutional debt brake, the fact is that the extra debt will finance the whole pack.

The 200 billion euros represent more than 5% of German GDP. One can only imagine the outcry if a southern member state implemented similar measures: Lindner would be the first to criticize the decision and remind his counterparts of their common responsibility as members of the euro zone.

Today, a nation that has always called for fiscal responsibility is itself acting irresponsibly. Other member states are not able to invest the same amount in their own economy – therefore, by doing so, Germany gains a competitive advantage.

As the burden of a potential increase in energy prices due to the influx of new German funds will be equally distributed among euro members, Berlin will be able to reap the benefits of its massive investments.

Gentiloni and Breton are therefore right when they call on Germany for more solidarity.

“More than ever, we must avoid distorting competition in the internal market. We must not get into a race for subsidies”, argued the two commissioners in an opinion piece for FAZ Wednesday.

“What does this mean for member states that do not have the same fiscal space as Germany to provide comparable support to their businesses and budgets? they rightly asked.

The issue under discussion points to one of the bloc’s fundamental contradictions – while the EU has a common monetary policy, its fiscal policy is, for the most part, the responsibility of member states. A full-fledged European fiscal union and increased common borrowing in the manner of NextGenEU could alleviate this contradiction.

However, Lindner is strongly opposed to anything resembling joint borrowing, arguing that it would lead to moral hazard and irresponsible behavior on the part of southern member states.

“The common debt does not help us to be competitive”, he replied to the editorial of Gentiloni and Breton in an interview with ZDF.

It remains to be seen whether he was referring to Europe or Germany when he argued that common borrowing would not help us. As things stand, it seems he was referring to the latter.

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The roundup

Overwhelmed by panicked requests for help to avoid being conscripted, Russian lawyers say they are working hard to offer advice to those at risk of being sent to fight in Ukraine.

Direct medical payments are a growing problem amid a cost of living crisis. Avoiding more catastrophic health spending requires targeting the most vulnerable, according to the WHO.

An Italian regional administrative court has dismissed fines of more than 200 million euros imposed last year on Apple and Amazon by the country’s antitrust authority for what it said was a collusive market agreement between the two giants .

After the “Brexit disaster” in the UK and Russia’s invasion of Ukraine, no right-wing politician in Europe is still advocating for his country’s exit from the EU, says Guy Verhofstadt.

Still on Brexit: The new UK government will go further on data reform than previous proposals, as it prepares to replace the General Data Protection Regulation (GDPR) with its own data protection system” tailored”.

Meanwhile, Germany has presented its revised strategic plan, a significant step towards implementing the EU’s historic agricultural reform, but neither farmers nor environmentalists are particularly convinced by the proposed changes.

Berlin belatedly committed to a European platform on joint gas buying ahead of a European summit on Friday to tackle the energy crisis. states.

EU finance ministers have reached an agreement to raise €20 billion from the bloc’s carbon market to support the transition away from Russian energy, paving the way for talks with parliament.

Last but not least, be sure to check out this week’s Transport Brief: MPs After Dark: Lawmakers Embark on Nightly Legislation.

Pay attention to…

  • Meeting of the College of Commissioners on the adoption of the action plan for youth.
  • Parliamentary debates on the escalation of the Russian war in Ukraine; Accession of Romania and Bulgaria to the Schengen area.

The views are those of the author.

[Edited by Alice Taylor/János Allenbach-Ammann]

James R. Rhodes