Chancellor Angela Merkel has “an enormous European political experience” and enjoys the trust of all heads of government. “This is clearly noticeable when we sit together in the European Council and it helps enormously,” said the German CDU politician.
There is an “established relationship of trust” between herself and the Chancellor. They are not always in agreement, “but we know that we can rely on each other”.
Ursula von der Leyen also appealed to the EU heads of government to adopt the corona reconstruction plan in July. “It is important that we finish before the summer break,” said the head of the commission in an interview. However, it is not certain whether the next EU summit on July 17 will be enough.
“We have to see whether such an agreement will be successful on the first try,” said the politician. Maybe a second summit would be necessary. “Either we make it the first one or we need a second one,” she said. “In any case, we have to work until the package is on the way,” added von der Leyen. Europe is in the deepest economic crisis since World War II and therefore urgently needs this economic stimulus package.
Read the full interview here:
Madam President, your long-time companion Angela Merkel will take over the EU Council Presidency on July 1st. Then two German women will lead the EU. How good is this team?
We have worked well together for many, many years. That is why we know that we can rely on each other, even if we do not always agree. And we are both very aware of how big our responsibility is in this crisis.
How would you describe your relationship with the Chancellor?
It is an established relationship of trust. We went through all the ups and downs together. Angela Merkel is a strong woman and I like to work with her. We think similarly, especially when it comes to our beliefs about modernizing Europe. That unites us.
When the largest Member State takes over the EU leadership with an experienced head of government, expectations are very high – maybe too high?
It is very lucky that Germany is taking over the EU Council Presidency in this deep crisis. The Chancellor has enormous European political experience and enjoys the trust of all heads of government. This is clearly noticeable when we sit together in the European Council and it helps enormously.
Angela Merkel had her first EU Council Presidency in 2007. At that time, she had to save the controversial EU Treaty in Lisbon. Will you now be able to do this together with the Corona reconstruction package?
We must and will and we are making progress. Eight weeks ago, Europe was deeply divided over the issue of corona bonds and debt communitization. In the meantime, everyone has basically accepted our new concept that the EU, with the guarantees of the member states, borrows money on the capital market in order to finance investments in the crisis and thereby modernize Europe at the same time. At the last EU summit in June, all heads of government agreed with this basic concept of our reconstruction plan. This is huge progress.
A violent dispute has arisen over the size and use of the reconstruction plan. Do you still believe that it can still be decided at the next EU summit on July 17?
It is good that we will finally meet again in person after such a long time. You cannot conduct such large negotiations by video conference. It has to be seen whether an agreement is reached on the first try. It is important that we finish before the summer break. Finally, the European Parliament still has to approve the plan and it has to be ratified by the national parliaments.
So could a second summit be necessary in July?
We either make it the first or we need a second. In any case, we have to work until the package is on the way. Until then we cannot afford a summer break. Europe urgently needs this reconstruction plan. We are in a deep crisis that we have not had since the Second World War. The IMF and the OECD expect economic output in Europe to decline by more than nine percent.
Dutch Prime Minister Mark Rutte is still in no hurry with the reconstruction plan. How do you intend to convince him and other critics?
Despite all the differences, the European Council agrees that we have to give an adequate answer to this unprecedented crisis. I take Mark Rutte’s concerns very seriously. He is right in saying that reforms must go hand in hand with investments. In the European Council, everyone is aware that our prosperity depends on the European single market starting up again. This applies to the Netherlands as well as to all other member states.
European subsidies are always welcomed, but the associated promises of reform have not always been kept in the past. Why should that change now?
We made provisions. Each Member State must submit a reform and investment plan in Brussels. We are reviewing these plans to see whether they serve our major political priorities – climate protection and digitization – and whether they take into account the EU’s country-specific reform recommendations. Not only the Commission has to approve the national reform plans, but also the Council. The aid is also to be paid in tranches, depending on whether milestones have been reached in investments and reforms.
So the Commission will impose reform requirements with unconditional toughness?
Each state draws up its own plan, of course it must go hand in hand with the European reform goals. I deliberately called the reconstruction plan “Next Generation”. The next generation will have to repay part of the debt it has now taken on, and that is why we must now mitigate the problems of the next generation for the future – especially with regard to climate protection and digitization. Investments in credit alone are not possible. We must also position Europe well for the future.
Children and grandchildren cannot resist parents and grandparents leaving them with a huge mountain of debt. Is that justifiable at all?
If we don’t push investments now, we will get into a dangerous downward spiral: companies would close in rows and unemployment would increase rapidly. Public budgets would groan under the financing of social costs and certainly would not make future investments. We cannot leave that to the next generation.
In fact, a country must economize in good years so that it can help citizens and the economy in bad years. However, many EU countries have not built up these financial cushions. Has the European Stability Pact failed?
Many countries have made great efforts to put their national budget in order. I feel sorry for Portugal and Spain, who laboriously worked their way out of the financial crisis and have just generated surpluses, only to plunge into the corona crisis without any fault of their own. We need to help these countries, but in such a way that Europe as a whole is more competitive and modern.
Rutte says that you don’t have to give the southern Europeans any money for it. Do you continue to insist on non-repayable grants of 500 billion euros or is it a little smaller?
We decided for a good reason that two-thirds of the reconstruction plan should go as a grant and only a third as a loan. This stimulus package must make the EU countries more resilient – especially those that are highly indebted. You cannot put more and more debts on any country, because otherwise higher and higher interest burdens will block your air. The whole EU budget is ultimately a single grant. It is about promoting the European common good – be it research projects or infrastructure projects. The EU grants create added value that benefits everyone through the common market.
Isn’t the EU Commission ready to negotiate the controversial grants?
We made our suggestion. It is now the right of the Member States and the European Parliament to seek consensus. You need to negotiate quickly and find the right balance.
To finance the plan, the Commission has proposed new European levies: airlines should buy emission allowances, although the Corona sector is already on the ground anyway. The digital tax has already proven to be inconsistent and this also applies to any kind of new company tax. Now take up both again. Aren’t they all castles in the air?
If we propose a stimulus package financed by credit, we must also provide a resilient repayment plan. There are theoretically three options. First: European programs are being cut. I cannot imagine that in such a crisis. Secondly, the EU countries pay significantly higher contributions to the EU budget – not the ideal solution if the national budgets are so tense. Third, levies with a steering effect in the direction we are aiming for anyway. The certificate trade increases the incentive for companies to invest in climate-friendly technologies. If products from Europe become a little more expensive as a result, then we cannot allow our market to be flooded with cheaper products from third countries that were produced with high CO2 consumption. That is why the CO2 marginal tax is necessary. Digital tax is about fairness. Why should small and medium-sized companies pay their taxes while the digital giants in Europe make big profits past the tax authorities?
America’s IT giants like Amazon are benefiting from the corona crisis. By contrast, Europe already fell significantly back in the 2008 financial crisis. Is the gap between the United States and China now threatened to widen by the corona crisis?
We are only at the beginning of the digital age. That’s why it’s just a snapshot. A lot now depends on us and whether we are strengthening our innovative strength and competitiveness. That is why our European investment package, for example for artificial intelligence or digital infrastructure, is so important.
But that alone is not enough.
Yes, I know, the high research expenditure in China and the United States is often mentioned. We are now significantly increasing our resources in NextGenerationEU, while these countries have to compensate for the lack of social protection for their citizens in the crisis. If we place our investments correctly now and use the momentum of reform, then we don’t have to hide and can confidently appear in the world.
There are fewer and fewer European companies among the 500 largest in the world. Does EU merger control need to be relaxed to enable European champions?
Our European competition law has a very important function because it makes our companies fit for competition. It encourages our companies to perform at their best so that they remain competitive on the world market. But it is true that we have to keep our eyes on the global market. We must not lose sight of the influence of other markets on Europe.
So should future mergers be based on competition in the global market and no longer just in the European market?
We are already considering the global markets today. At the same time, in view of the rapid change in world markets, we must always ensure that the competition rules are appropriate.
Brexit is also a negative factor for Europe. Now there is an uncontrolled exit from the internal market at the end of the year. What would it mean for the EU?
No deal is good for anyone, but it would hit Britain more than us. We have a common market with 27 countries. The UK only has its home market. The EU has over 700 international agreements that open up markets around the world. That’s a pound the British have yet to work out. We want an agreement with Britain, but we will not question our values and basic principles.
The EU normally takes many years for comprehensive trade contracts. For the British there is only time until the end of October. Is that possible?
It can work if there is willingness to negotiate. We want to ensure fair competition and the fundamental rights of our citizens. That is why the European Court of Justice is so important to us as a last resort. A fair regulation must also be found for fishing. This can be done because a great deal of preparatory work has been done in recent years. Time is short, but it’s doable.
Could a framework contract be negotiated by the end of October and the details discussed later?
No, that is unthinkable for us and would also require a longer UK stay in the single market. Prime Minister Johnson categorically ruled that out.
Couldn’t the extension come in autumn to prevent the no deal?
I don’t see any legal basis for that. The deadline for an extension application expires at the end of June. It is clear that the UK will leave the internal market on December 31st.
Does the EU definitely lower the tariff barriers if there is no trade agreement?
Yes, unfortunately there must be tariffs and import quotas. Britain would then be a third country like many of our global trading partners.
The Brexit and the Corona pandemic are serious shocks for Europe. You are now in demand as a crisis manager and not as a designer. Do you mind?
That is the nature of crisis, but it also gives you the opportunity to shape the future. And I am determined to do that.
The corona crisis has almost brought political life in the EU to a standstill. When will it return to normal?
It depends on the virus. We can only finally defeat him when we have the vaccine. We are working hard to develop it and make it widely available. The same must happen to poor countries in Africa, Asia and South America because that’s the only way we can defeat the pandemic.
So life with video conferencing and home office will drag far into the next year?
That is possible, but we are also learning to live with the virus. We got used to masks and spacing. For example, at the EU summit in July there will be far fewer people. In the end, it will be important that we make the vaccine available to everyone. Because we are only safe from the virus when everyone is safe.
Ms. von der Leyen, thank you for the interview.
More: The EU summit does not bring about a breakthrough in corona reconstruction, but it does bring us closer.