This is why Brussels snorts against Germany’s Recovery Plan

This is why Brussels snorts against Germany's Recovery Plan

On taxation, labor productivity, pensions and liberalization of professions the EU Commission presses the German government on the Recovery Plan according to the German press

Few would have expected it, but Germany has also ended up in the crosshairs of Brussels officials who are evaluating plans for the Recovery Fund that should revive the European economies hit by the pandemic crisis. Precisely the country that more than any other has established an essential link between financial aid and innovative, reforming, concrete and measurable projects over time.

And now the Handelsblatt reveals that, in a confidential meeting held last week between EU experts and officials from the German Chancellery and the Ministries of Finance and Economy, European Sherpas pointed the finger at the plan presented by Berlin to obtain the 25 billion euro non-repayable fund that would be due to Germany. Reason: there is no real reform plan for the next few years.


In the German projects, in truth not at all emphasized by the government (as has instead happened for the plans presented by other countries, such as France, Greece, Spain and Italy itself, whose elaboration was particularly difficult and whose results, according to rumors, are considered very disappointing), according to Brussels officials, "the reform zeal required of other EU members" is lacking. Still the Handelsblatt adds that the EU Commission would have particularly emphasized that "Germany represents a sort of virtuous model for other countries" and it is therefore important that its plan meets the required requirements. And which, incidentally, Berlin wanted to include as a fundamental criterion of that Recovery Fund emphasized as a historic turning point for a new European policy, matured in the heart of a new-found Franco-German collaboration and launched with the decisive support of the German presidency. .

The flagship, in fact, of the last semester of presidency of Angela Merkel, who after the next federal elections will leave any political office, at least national. So concrete projects, it was said, with precise objectives and timing, measurable in their development, and above all linked to innovative sectors, able to make economies stressed by covid the necessary qualitative leap to compete in an increasingly global framework. competitive: climate change, digitalisation, education and training.

If Germany also has deficient reform projects, Brussels now says, it will be difficult to persuade less rigorous members to refine their plans, with negative consequences for the economies of the entire continent.


The criticisms of European officials of the German plan are timely. The first concerns pensions. “Brussels sees a great need for intervention in pension policy”, reports Handelsblatt , “since a wide range of measures to improve the pension system are still pending. The second point is the abolition of a tax measure, the division of income between spouses (Ehegattensplitting) which, according to European technicians, is a mechanism that discourages people from working longer hours. On this aspect, alternatives are also suggested from Brussels, such as tax relief for lower incomes. The third point refers to the liberalization of some professions that are still too regulated: the recommendations of Brussels explicitly mention the crafts sector and architects ”.

"These are undoubtedly cumbersome issues", comments the economic newspaper, adding: if you put together the suggestions of the European Commission and the projects presented by the German government for the collection of funds linked to the EU reconstruction fund, it emerges clearly " the enormous difference in reformist claims between Berlin and Brussels, to put it mildly ”.


The Handelsblatt does not limit itself to the news, but itself criticizes the German plan, in which "there is no trace" of the measures requested by the EU: in their place, the federal government smuggles as reforms measures such as tax cuts for electric cars for 295 million euros, incentives for the construction of wooden buildings with a lower climate impact for 70 million euros or investments in municipal research laboratories for energy change for 57 million euros. Some of these initiatives had already been adopted by the government in the previous months (on the research laboratories, Minister Altmaier had promised 100 million euros for the development of projects related to the hydrogen economy to be developed immediately in the field at the level of industrial production ), which is probably why the German plan did not have the emphasis of those of other countries: these are projects that the government considers innovative and that now it would like to finance at least in part with money from the Recovery Fund. But for the Handelsblatt , “although some measures are reasonable, they are always subsidies and not structural reforms”.


The Düsseldorf newspaper then gives a voice to some influential German economists who have sided with Brussels. Starting with the essays who advise the German government on economic issues and who have long been pointing the finger at a certain "reformist fatigue" of the latest governments. Their president, Lars Feld, is not at all surprised by the flaws in the German recovery plan and considers the economic policy of the Grosse Koalition executives "turned to the past": "Since 2013 we are not in a time of reform but of reformation" . The faults are almost equally divided between the partners of the last two executives: the SPD in particular tries in every way to restore the status quo before the reform period of its own Chancellor Schröder and a large part of the CDU supports it.

The criticism of Clemens Fuest, president of the Munich IFO is more specific: "In the debate on the funds for the economic reconstruction of the EU it is clear that Germany is not a model in terms of reforms and has missed the opportunity to implement those requests from Brussels ".


According to the Handelsblatt , the tension between Brussels and Berlin is palpable. At the meeting last week, the German side would have opposed the observation that the measures requested could cost electorally votes in a year like 2021, dominated by 6 regional elections and one federal election. “There are elections every year”, would have been the curt response of European officials. But the Germans reject the idea that their country is the one in need of more stringent reforms and fear that the EU Commission wants to use a tug-of-war with Germany as an example for other less virtuous member states. The main way is of course that of a compromise. The Handelsblatt notes that it is the federal government itself that lowers the tone, avoiding emphasizing the conflict: "We are in a normal phase of negotiations with the EU", is the note reported.

There is time until April to file the positions and neither side has an interest in going further in the comparison. “In its recommendations, Brussels asks Germany to finally address the problems of public investment”, concludes the business daily, “for years, billions of investment funds have not been withdrawn from the federal budget due to administrative bottlenecks. The Ministry of Finance is now working on a roadmap to resolve the investment lag. Hopefully, this will make the European Commission lenient enough not to call for further reforms ”.

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Mon, 25 Jan 2021 11:22:07 +0000.