The EU’s emergency pandemic economic measures have raised the possibility of profound reappraisals of economic policy. “A unique challenge to economic policy,” Paschal Donohoe told the Institute for International and European Affairs last Friday.
Most dramatically, last Monday Germany and France surprised everyone with an initiative to back a €500 billion EU pandemic recovery fund. That it should be administered by an expanded role for the commission, that it will, if agreed, come as grants not loans, and gingerly takes a step both towards mutualising debt and towards what Berlin has always feared about economic union, a form of "transfer union", all represent significant breaks with German orthodoxy.
Will others also be prepared to follow suit in breaking taboos? Donohoe on Friday appeared enthusiastic in endorsing the German approach. “While what is being proposed today does not amount to mutualisation of debt within the EU,” he said,”the ability of the Commission to borrow significant sums to finance EU budget programmes would, if it is agreed, represent a significant step forward in European integration.”
But he insisted "that primary responsibility for management of our economies should continue to rest at national level", and although Ireland has been willing recently to embrace the idea of "coronabonds", he also reiterated positions and made clear he sees a future for the currently silent alliance of fiscally conservative northern states that has been dubbed the New Hanseatic League.
Ireland, he said, saw globalisation as an opportunity to build “a better global system that mitigates the risks of economic and political dependency”. This meant working towards greater strategic autonomy in areas such as the production of medicines and medical devices. And he nailed the country’s colours firmly to a free-trading, anti-protectionist mast. He was wary of French proposals to reform EU competition policy to boost European “champions”, and only willing to move at the pace of the slowest on harmonisation of corporate tax. Familiar themes.