Biden-Macron Summit and US-EU relations: Biden's green subsidy plan deviates from the neoliberal gospel as practiced by the EU

French President Emmanuel Macron was in Washington for an official state visit with President Joe Biden. The White House released a Joint Statement text from the meeting.

It struck this rhetorical note, “France is the United States’ oldest ally, and while our relationship is rooted in history, it is oriented squarely toward the future.” Sentimental statements like this are standard diplomatic rhetoric.

But the “squarely toward the future” part really means: what happened in US-French relations 250 years ago doesn’t actually matter for what the two nations’ relationship is today. The US would have gone to war with France in the latter part of the 1860s if their puppet regime in Mexico appeared likely to survive. But that actually has little to do with US-France relations in 2022.

That’s why I was surprised to see Heather Cox Richardson’s downright sentimental account of the meeting on her Facebook account. She focused on this aspect of the statement (02/12/2022):

The leaders reaffirmed that France and the United States have a historic past and emphasized that our shared past is the basis for shaping a joint future in which the old allies work to defend the rules-based international order now under attack from autocrats who hope to dominate their neighbors with force.

In 1776, what is today the nation of Ukraine was controlled by Russia and Poland. Times change. And international alliances change, for sure.

Macron vs. Biden’s (kinda-sorta) Green New Deal

Even the more interesting formal diplomatic statements like this one are typically dull-as-dirt in their style. That’s diplomacy.

But the most urgent disagreement of this summit was Macron’s criticisms of the Biden Administration’s subventions (as EU jargon tends to call them) that are part of the Green New Deal aspects of his Inflation Reduction Act.

[W]hen the host [Biden] is asked at the press conference after a three-hour conversation behind closed doors how the currently biggest problem in the transatlantic relationship can be eliminated, he is extremely buttoned up. "I'm confident," Biden replies curtly. Some journalists in the Christmas-decorated East Room of the White House laugh because they think it’s a pause for effect. But Biden insists, "That's my answer." That's all he wants to say.

Thus, after the meeting between the two heads of government, it remains unclear whether there has been any substantial rapprochement in the dispute over America's industrial policy. The stumbling block is the Biden Administration's $370 billion climate and social package, which aims to advance the energy transition, while at the same time reducing US dependence on foreign supply chains and creating jobs at home. The huge state subsidies should therefore only exist if the components for electric cars, batteries or other renewable energy projects were manufactured in the USA – a massive distortion of competition to the detriment of Europeans.

... "This is super-aggressive for our economy," [Macron] complained undiplomatically shortly after his arrival at a lunch with American politicians and entrepreneurs: "Maybe you can solve their problems this way, but you increase mine." [my emphasis] (Karl Doemens, Macron bei Biden: Viel Pomp und drei knappe Wörter Standard 01.12.2022)

When (serious) commentators talk about Biden being “left” of Obama in some ways, this is a big part of what they mean. Neoliberal globalization dogma holds such subsidies to be a departure from the economic ideal. The massive role played by government in socialist China in their economy is a big issue in the China-EU relationship, as well.

That term “industrial policy” was a slogan of the Democratic Party left in the 1980s, referring to the need for the government to actively steer the economy macroeconomically through regulations, tax policy, and subsidies. (Anshu Siripurap & Noah Berman, Is Industrial Policy Making a Comeback? CFR 11/18/2022) It was a left-liberal version of neoliberalism, trying to extend basic New Deal-Great Society principles into a more deregulated environment. It dropped out of the Democratic political vocabulary years ago. But it’s the right description for the measures Macron is questioning. And it does represent a more “left” position than Obama took in the TTIP (Transatlantic Trade and Investment Partnership) negotiations which never overcame EU reservations.

This doesn’t mean that the idea of a new US-EU treaty along the lines of TTIP is entirely defunct. Bad ideas on which international corporations stand to make major profits have a remarkably persistent character.

European strategic autonomy: the US doesn’t want it

Here are some other currently relevant points:

The Presidents recognize the importance of a stronger and more capable European defense that contributes positively to transatlantic and global security and is complementary to and interoperable with NATO.

“Complementary to” NATO means that any European Security Force is expected to subordinate itself to NATO priorities, i.e., US policies. We saw during the Cheney-Bush Administration how that can work. (Elizabeth Pond,  Friendly Fire: The Near-Death of the Transatlantic Alliance 2004) The Democratic version may be friendlier in its rhetoric than the Cheney-Bush version, but the basic position is the same.

Ever since the European Union was established in its current form by the Maastricht Treaty of 1992, US policy has encouraged the expansion of the EU as beneficial for solidifying the alliance with the central and eastern European nations.

But the US preference since that time has been for an EU that is broad but relatively weak, i.e., unable to pursue geostrategic goals that may conflict with those of the US. This has been an enduring of the now-facing “unipolar moment” in which the US was the un

Even though that moment has now passed with the rise of China’s international clout, the US is still pursuing the goal of preventing the rise of any “peer competitor” to the US. And that includes the EU, all sentimental historical recollections aside.

At the same time, the Russia-Ukraine War and the shift of American focus toward containing China creates new pressure for more diplomatic and military cohesion by the EU. Anatol Lieven remarks (Beyond the cameras, Macron-Biden meeting tougher than it looks Responsible Statecraft 12/01/2022):

European militaries are to a considerable extent irrelevant as far as present U.S. strategy is concerned. Russia has neither the ability nor the will to invade NATO, and there appears to be no chance of European governments sending their soldiers to fight in Ukraine.

Ukraine policy

No obvious surprises here. “[Biden and Macron] reaffirm their nations’ continued support for Ukraine’s defense of its sovereignty and territorial integrity, including the provision of political, security, humanitarian, and economic assistance to Ukraine for as long as it takes.“

No mention of such priorities that have been mentioned publicly by the Biden Administration this year as regime change in Moscow or using a prolonged war to degrade Russia’s military capabilities in a major way. Those aims would be significantly broader that securing “sovereignty and territorial integrity“ of Ukraine in its recognized international borders.

But it also includes this goal: “[Biden and Macron] also reiterate their steadfast resolve to hold Russia to account for widely documented atrocities and war crimes,“ and specifically mentions the International Criminal Court as one of the mechanisms. This in itself isn’t new, and actually is required by international law. But the Russia-Ukraine War is not going to end with Russia agreeing to send Putin and his generals to be tried for war crimes in the Hague.

This is one of constant dilemmas of a liberal-interventionist foreign policy. War criminal or not, Vladimir Putin is head of the Russia government (Biden 'prepared to sit down with Putin' if Russian president wants to end the Ukraine war Euronews 12/02/2022):

While speaking to journalists at the event, Biden also said that he was open to dialogue with Russian President Vladimir Putin, provided he made concrete plans to end his aggression against Ukraine. 

"I'm prepared to speak with Putin if in fact there is an interest in him deciding he's looking for a way to end the war," Biden said. "If that's the case, in consultation with my French and my NATO friends, I'll be happy to sit down with Putin to see what he wants, has in mind. He hasn't done that yet."

China policy

The Biden Administration has recently been giving new emphasis to the idea of NATO playing a bigger role in militarily containing China. And the Joint Statement reflects that:

The United States and France, two nations of the Indo-Pacific, are strengthening their partnership in the Indo-Pacific region to advance prosperity, security, and shared values based on a rules-based international order, transparent governance, fair economic practices, and respect for international law, including freedom of navigation. The United States and France intend to expand their regional diplomatic, development, and economic engagement with a view to building resilience in the Pacific Islands. They also intend to increase practical coordination in the region on maritime security. The United States intends to increase its support and material contributions to air and maritime deployments conducted by France and other European nations in the region. [my emphasis]

The notion of France as an “Indo-Pacific” nation is one that deserves reflection. But there are remnants of the French Empire in the Pacific that give them some thin claim to that status. (Céline Pajone, France: the leading European power in the Indo-Pacific IFRI Sept. 2021) But in light of the fact that the EU countries in the best of cases will be in a significantly defensive and adversarial relationship to Russia for at least a couple of decades now, the idea of French, Estonian, and Polish forces patrolling the Taiwan Straits doesn’t necessarily sound like the best idea.

But, as Lieven also notes, “As for European military deployments against China, it is already clear that these will remain purely symbolic.“ Even so, any EU military involvement in NATO actions in the Pacific carries not only political and financial ones, but also military ones.

The “rules-based international order”

The concept of a “rules-based international order” in the Joint Statement is a concept the US has been promoting for a while. Notice here that this carefully worded diplomatic document speaks of that concept as a separate one from “respect for international law.” Whose rules it is on which the order is based is a critical one.

As Über-Realist Stephen Walt wrote last year (China Wants a ‘Rules-Based International Order,’Too Foreign Policy 03/31/2021), there are many versions of a “rules-based” system. “The differences between the American and Chinese conceptions are relatively straightforward,” in his view. The US favors a “multilateral” system that gives particular emphasis to American preferences, including liberal values but by no means restricted to them. “By contrast, China favors a more Westphalian conception of order, one where state sovereignty and noninterference are paramount and liberal notions of individual rights are downplayed if not entirely dismissed.”

Sunday's pro-democracy election outcomes in France and Slovenia

Emmanuel Macron's re-election as French President this past Sunday was a relief to pro-democracy leaders and voters in Europe: A divided nation: Five takeaways from France's election France 24/AFP 04/25/2022.

Sunday's election in Slovenia also came out well, although the newly-elected President Robert Golob is relatively new to his role as a political leader. But he campaigned in favor of democracy on a left-leaning program against the Orbanist former premier Janez Jansa, who had taken a hard right turn the last couple of years. (Annette Gantner, Robert Golob: Sloweniens Shootingstar Oberösterreichische Nachrichten 26.04.2022) The national Interior Minister claims that a far-right Identitarian group, apparntely one called Patriots in Motion, was behind the attack, in which fortunately no one was injured. (Bericht an Staatsanwaltschaft nach rechtsextremer Störaktion übermittelt Standard 25.04.2022)

Macron's victory is important. But Frqance also had an unusually low turnout by French standards on Sunday. Also, "In an alarming signal for Macron, 8.6 percent of those who went to voting stations Sunday also took the trouble not to cast a vote for either candidate, with 6.35 percent of the votes blank and 2.25 percent spoilt."

One of Macron's problematic ideas was to propose during the campaign to raise the retirement age, which sounds like a classic corporate Democratic idea in the US. For any center-left party, the idea that voters have nowhere else to go is a risky play. Obviously a significant number of voters were upset enough that they took the trouble to vote but didn't vote for either candidate.

The conventional press narrative is that Macron's win is a good sign for "Europe," i.e., for EU leadership. A big indication of how serious he is about that is whether he immediately gets out in front on the refugee issue to create a narrative to counter the xenophobic one that's already in motion.

So far, the EU is largely whiffing on the issue in stereotypical EU fashion by each country hoping some other EU governments will do something so they won't have to. This weekend there was an attack on a refugee shelter in Vienna that housing some Ukrainian refugees among others, the first incident like that I've heard against Ukrainian refugees. (Rechtsextreme Aktion gegen Ute-Bock-Haus ORF 24.04.2022)

Boris Johnson, now head of a non-EU country, doesn't want no Ukrainian refugees there because some of them might be Russian spies, a variation on the ever-popular "criminal foreigners!!" theme. Another one getting some traction is, "How come so many Ukrainian refugees have cars?" (Translation: "Welfare loafers!").

Monday's UN count: 4.7 million Ukrainian refugees in the EU and Moldova since Feb. 24. Of the two EU countries most likely to try to ignite a panic over refugees, Poland has 2.9 million and Hungary 0.5. The refugee crisis year of 2015 that sent the Putinist parties and their xenophobic messaging soaring involved 1.1 million refugees for the entire year, most of which went to Germany.

France goes on a (secularist) jihad against ... "Islamo-leftism" (?!?)

Emmanuel Macron's version of "European values" is looking grimmer all the time. I must admit I don't recall hearing the term "Islamo-leftism" before although this article says it's been around since the 1960s. You might think "Islamo-leftism" would be some Islam-inspired set of political values that included secular government and protection of equal rights of women, the same values European Muslim-haters claim to be defending against those scary, scary Muslims. But apparently it's just another synonym for "we hate Muslims and fancy perfessers".

French Assembly passes bill aiming to curb Islamism Reuters 02/17/2021:

Norimitsu Onishi and Constant Méheut (Heating Up Culture Wars, France to Scour Universities for Ideas That ‘Corrupt Society’ New York Times 02/18/2021):

[T]he French government announced this week that it would launch an investigation into academic research that it says feeds “Islamo-leftist’’ tendencies that “corrupt society.’’

News of the investigation immediately caused a fierce backlash among university presidents and scholars, deepening fears of a crackdown on academic freedom — especially on studies of race, gender, post-colonial studies and other fields that the French government says have been imported from American universities and contribute to undermining French society. [my emphasis]

You have to give Macron's political consultants some credit though. They have managed to frame this latest anti-Muslim schtick as anti-Americanism, too!

There's a real irony here, as there often is with these kinds of goofy theories: "In recent years, a new, more diverse generation of social science scholars has ... clashed with an older generation of intellectuals who regard these social science theories as American imports — though many of the thinkers behind race, gender and post-colonialism are French or of other nationalities." (my emphasis)

I guess the good thing about terms like "Islamofascism", "political Islam", and this "Islamo-leftism", is that you can use them without having to know anything about Islam or politics or political theory to use them. Because they all are various forms of "we hate them thar Muslims.

But an actual "Islamo-leftism" that included secular government, women's rights and other things like reducing poverty and providing good public services really would be a good thing. There are a lot of Muslims in the world in a lot of very different countries, so elements of those ideas can surely be found in various forms, though this French propaganda campaign has nothing to do with that. Since many of those countries were colonies of Western powers, anti-imperialism has been a element in various strains of "Islamic" politics, something which corresponds with left politics. And the obligation for individuals believers to contribute to supporting the poor is one of the Five Pillars of Islam.

But much of what we know today as "Islamism" or "Islamic fundamentalism" was also consciously promoted by the US and other Western powers as a conservative alternative to Soviet ideology and "Arab socialism". Robert Dreyfuss describes that history in Devil's Game: How the United States Helped Unleash Fundamentalist Islam (2005). The US support for the mujahideen in Afghanistan's war against the USSR - the mujahideen who were celebrated by US conservatives and most liberals alike as heroic freedom fighters - created a distinctive form of "jihadism" of which we have become more familiar than most of us would have wanted to. Even though the theological trends incorporated into the ideologies of groups like Al-Qaida and the Islamic State have much longer historical roots. (See, e.g.: Myra MacDonald, From "Freedom-Fighters" to the Islamic State: The Mutation of Jihad War on the Rocks 03/09/2015)

One of the favorite Islamophobic political tropes is to say, look, them Muslims are against women's rights and are anti-Semitic, and I hate Muslims, so I'm for women's rights and against anti-Semitism. It's cynical to the point of caricature.

But pretending you believe transparently ridiculous stuff is part of the far-right culture, in Europe like in America. Of course, not everyone of that persuasion has to *pretend* they believe transparently ridiculous stuff, because they really do believe it.

For a long time, I thought a classic-liberal-type position would make sense as a counter-argument, i.e., a secular government should enforce equal rights and freedom of religion. And illegal religious coercion should be dealt with legally. Protection against domestic violence and psychological abuse should be available to everyone, along with medical and social help for victims. Handling religious diversity is always a challenge in education for children and teenagers, of course. But it's far from being a new problem.

Yet even though all of that is sensible from a liberal or left position, those arguments don't really address the actual Islamophobic rhetoric. One, because Islamophobic fear-mongering is actually about "Othering" Muslims and foreigners. And, two, in my limited experience, e.g., people complaining about Muslim women and girls wearing "headscarves" (hijabs) don't give a flying flip about Muslim women's rights. (Nor are they particularly concerned with the rights of non-Muslim women.)

The headscarf gripe is mainly used to stigmatize Muslim women and girls, not as any show of actual sympathy. This is very much in line with the identitarian/xenophobic/racist conspiracy theory that Muslim women and girls are the biggest danger to "The West" because they supposedly breed more little Muslim babies, as part of a plot enshrined in the Qur’an to conquer infidels by more prolific sex, or whatever.

I can say specifically for Austria that Austrian-born Muslim children on the average produce as many children as other Austrian-born Austrians, not more. Although I expect most if not all EU countries see something similar.

If the Islamophobes were serious about "integration" of Muslims in egalitarian, democratic cultural practices, something like a "left" version of Islam is exactly what would be needed to produce that. That's especially true for de-radicalization efforts aimed at countering actual Islamist religious-political propaganda. Young people who are attracted to that scene need to hear and see Muslim men and women who can talk about the Islamic faith and social values stemming from it. They aren't going to listen to some Christian preacher or rightwing politician saying that Islam is Satanic or that the existence of Muslim women and girls are the greatest threat to "European values".

Given that Macron's latest xenophobic posturing is focused on complaining about fancy-pants college perfessers and their weird ideas that ain't gone teach nobody how to repair a car, this just seems like another exercise in rightwing populism to me.

A final consideration. Predominantly Muslim Algeria was formally a département of France from 1848 to 1962, not a separate colony like France's other colonial possessions. So if France's supposedly superior European culture hasn't yet found a way to "integrate" Muslim citizens - maybe it's not Muslim culture that is the only problem.. If France hasn’t found a solution to the Muslim “problem” by now – maybe Muslim culture isn’t the main problem.

International dispute around the Samuel Paty murder in France

Turkish President Tayyip Erdoğan is taking the current uproar in France over the murder of a teacher by a Muslim zealot to posture as a champion of the Islamic faith (Muslim world condemns Macron, France over treatment of Islam 10/26/2020):

The backlash over French President Emmanuel Macron’s critique of Islam has intensified after Turkey’s President Recep Tayyip Erdogan questioned his counterpart’s mental health, while Muslims in several countries are demanding a boycott of France.

Marking his second sharp criticism against Macron in two days, Erdogan said on Sunday that the French president had “lost his mind”, prompting France’s foreign minister to recall the country’s ambassador in Ankara.

The controversy has to do with a sensational case of a 47-year-old teacher, Samuel Paty, who "was beheaded after he reportedly showed cartoons of the Prophet Muhammad during a civics lesson." (Rachel Treisman, After Brutal Beheading, Rallies Erupt Across France To Honor Slain Teacher NPR 10/18/2020)

Deutsche Welle English reports on the ensuing discussion in France (Elizabeth Bryant, As France mourns slain teacher Samuel Paty, some question secular values 10/24/2020):

The same mocking cartoons which inspired the Charlie Hebdo attacks — and last month's stabbing of two people in Paris — are again testing the limits of France's vaunted secularism, or laïcité. Clashing views of faith and free speech are on the line. Feeding the tensions, some experts say, is a broader sense of stigmatization and disenfranchisement felt by many French Muslims, who represent Western Europe's largest Islamic community.

Now, as President Emmanuel Macron and his centrist government have vowed an all-out war against radical Islam, critics have said the strong defense of secularism is only exacerbating the problem. Instead of providing a neutral space for the country's melting pot of beliefs, as it's intended, secularism - enshrined in a 1905 law separating church and state - has become a flashpoint.

"There's a political culture that has problems with Islam," said Farhad Khosrokhavar, a prominent sociologist and expert on radical Islam. "And this political culture, laïcité, is a problem."

If one wants to have a real grasp of the real issues involved with violent Islamic fundamentalist groups, secularism and its relation to the democratic values of freedom of religion, social integration of immigrants from Muslim countries, women's rights, Islamophobic demagogy, and the problem of so-called "parallel communities". Elizabeth Bryant discusses the French version of the latter:

Authorities insist there is no disharmony between moderate Islam and French values. They instead fault communitarianism, a term used in France to suggest an inward-looking view of society that is often, although not exclusively, linked to conservative Islam. More recently, Macron has replaced communitarianism with separatism in his lexicon.

Some observers have said that same inward view helped fuel Paty's murder, with authorities citing an online hate campaign launched by a disgruntled parent of a student in Paty's class. That campaign, they say, motivated 18-year-old Chechen refugee Abdoullakh Anzorov to kill Paty.

In its fight against communitarianism over the years, the French government has introduced bans on religious symbols in public schools and offices and outlawed full-body Islamic swimsuits, or burkinis, in public swimming pools and beaches, the latter cast as a hygienic measure.

In September some lawmakers, including from Macron's own party, recently walked out of a session of the National Assembly during a speech by a veiled student leader — although she had broken no laws with her hijab. [my emphasis]

The French conflicts around Islam and Muslim extremism often gets framed in the press as a conflict between secularism values/laïcité and Islamic fundamentalism. In terms of classical liberal-secularist values, people are free to practice the religion they want, or no religion at all, and are free to talk and write about their religion without being put in jail for it. At the same time, they are free to criticize other people's religion or lack thereof without being jailed or murdered for it. In that framework, Samuel Paty's murder seems like a classic case of a hate crime motivated by his exercise of legitimate speech as a teacher.

But Islamophobia is also a key element of the ideology of non-Muslim far-right parties and sects and is often promoted by people who are also anti-democratic and racist and are using Islamophobia to promote a political program that has nothing to do with respecting women's rights or freedom of religion.

So keeping in mind the need to walk and chew gum at the same time is important in looking at larger controversies like the one that is currently associated with the murder of Samuel Paty.

The notion that Muslim form "parallel societies" in Europe, or "separatism" in Macron's usage, is always worth scrutinizing closely when it's used by politicians or the popular press. In France, for instance, the status of Muslims in society is heavily influenced by the specifics of French colonialism, and in particular the experience of Algeria being held as a French colony since 1830 and then becoming independence in the Algerian War of 1954-1962, which was particularly traumatic for French and Algerian politics.

But the notion of "parallel society" easily serves as one more iteration of the idea of Those People Who We In The Majority Society Don't Like as "not being like us," i.e., "The Jews keep to themselves", "Black people don't want their schools integrated with white schools," and on and on. Obviously, if immigrants or other minorities are really completely isolated from the society in which they live to such an extent that they really cannot participate in daily life and work as normal members of society, that is clearly a problem. And one that responsible governments would need to address in a practical and decent way.

But on the other hand, immigrants are more likely to hang out with other immigrants or previous immigrants from their national group because that's a key part of integrating into a new society. And terms like "parallel society" or "separatism" is mainly a means of Other-ing a targeted group. The US and European countries, for instance, have compulsory public education laws that guarantee most children growing up there will develop basic social ties outside their immediate family group. And it's not as though France or Germany or Italy are peppered with independent republics of Muslims or Algerians where the authority of the national government does not reach, like the Russian-controlled enclaves in Ukraine or Georgia, for instance.

And what we call civil society could also be described as an overlapping series of "parallel societies." The Catholic Church is itself a type of "parallel society" - as Catholic-haters have pointed out for centuries! - that has its own rituals, its own membership rules, its own institutions of authority, its own publishing houses, and even its own version of sharia, i.e., Catholic canon law. Obviously, this doesn't mean that Catholics are allowed to organize their own deaths squads and go behead some Protestant teacher they don't like. But it does mean that buzzwords like "separatism" and "parallel society" used for other-ing people should be treated with appropriate caution.

The same goes for headscarf debates.

The "Merkron" plan and the Frugal/Greedy Four

There is a discussion underway in the EU about a plan for the EU to borrow money and distribute it to member countries to counter the negative economic effects of the corona crisis. German Chancellor Angela Merkel and French President Emmanuel Merkel proposed a €500 billion recovery fund for the European Union in which the EU would borrow funds to distribute (not loan) to member countries to deal with the current recession that we're so far calling the COVID crisis or the coronavirus crisis. (Daniel Boffey, Merkel and Macron propose €500bn EU rescue fund Guardian 05/18/2020) One of the notable features of the proposed fund is that it would be an project of the full European Union, not of the euro currency zone.

The press like to refer to the relationship between the two leaders as "Merkron," reflecting the continued centrality of German-French leadership in the EU. A role that has now increased in relative importance with Brexit.

The "Merkron" proposal drew support from 23 of the EU's 27 members. Four countries, styled as the "Frugal Four," objected to the proposals on the grounds that it would be a direct EU support to member nations without an obligation to repay: Austria, Denmark, the Netherlands and Sweden. Austria's baby-faced Chancellor Sebastian Kurz has been prominent in making the case for the Frugal Four, also known as the Greedy Four. They made a counter-proposal whose central concept was that the assistance be made in the form of loans that would have to be repaid. This, of course, would affect the national credit rating and bond rates of countries like Spain and Italy, especially in the latter case increasing the likelihood of a new euro crisis.

The proposal has been evolving in the negotiations with the Greedy Four, with Ursula von der Leyen as head of the EU Commission proposing a variant. Lionel Laurent reports (An $826 Billion Battle Is Brewing in Europe Bloomberg Opinion 05/28/2020:

The European Union’s pandemic recovery plan has all the hallmarks of a historic leap in the dark for the 27-member bloc.

It aims to unleash as much as 750 billion euros ($826 billion) of fiscal stimulus, fueled by joint borrowing on financial markets - a big deal for member states that have always jealously guarded the power to tax and spend. The fact that the plan unveiled by Commission boss Ursula von der Leyen is so clearly aligned with the proposal from France’s Emmanuel Macron and Germany’s Angela Merkel is especially positive: Paris’s desire for continental assertiveness and foreign-policy grandeur hasn’t always matched Berlin’s focus on balanced budgets. ...

At the center of the battle are the so-called “frugal four” - the Netherlands, Sweden, Austria and Denmark - taking up a combative role similar to that of the British when they were members. As wealthy net contributors to the bloc’s budget, they’ve already been pushing back against what they see as unfair increases to the share they’re expected to chip in after Brexit; February negotiations on the next seven-year budget went nowhere after 28 hours of talks.

The Covid-19 crisis has redoubled efforts by the frugal four to push back against perceived profligacy, as the EU considers a bigger budget outlay than before, at 1.1 trillion euros (still only about 1% of gross national income), adds on pandemic stimulus tools and proposes aid in the form of grants rather than loans to be paid back — a package worth 2.4 trillion euros. The budget hard-liners may lack the diplomatic heft of Germany, but they can’t be ignored, as the plan needs unanimous support across national parliaments. [my emphasis]

Basti (Austrian Chancellor Kurz) is working this to promote his own anti-European credentials among the hard-right voters he works hard to cultivate. Basti has often aligned himself with the Visegrad group (Hungary, Poland, Czechia, Slovakia) on other anti-European positions like flat opposition to an revision of the Failed Dublin System of immigration and asylum processing. But his friends in the Visegard Group, including the EU's current start authoritarian, Hungarian Prime Mnister Viktor Orbán, want some of the money foreseen in the Merkron aid concept.

And, of course, different players try to negotiate deals over all kinds of things, so that's a factor always present in EU politics. (Just like every other kind of politics!)

Matthew Karnitschnig reports (Sebastian Kurz cautious on Commission’s €750B recovery blueprint Politico EU 05/27/20):

Austrian Chancellor Sebastian Kurz said that he and the other leaders of the EU’s so-called frugal four group were encouraged by some aspects of the European Commission’s proposal for a coronavirus crisis recovery fund, but cautioned it represents just a “starting point” for negotiations.

“What we find positive - not just myself, but the Netherlands, Sweden and Denmark - is that there is a time limit and that the fund will be a one-time emergency measure and not the first step toward a debt union,” Kurz, who has emerged as the unofficial spokesman of the frugal faction, said in a telephone interview with POLITICO on Wednesday.

“Considering that there are many in Europe who want such a debt union, it’s important to us that this be clarified in writing once and for all,” he said, referring to concerns among the frugal group that the fund could morph into a permanent fixture, opening the door to mutualization of members' debt under the banner of the EU. [my emphasis]

Such political melodramas need to be understood in the context of EU politics, which is too often superficially reported even by the European press.

The EU is a strange critter. Its formal justifications are that it has promoted peace and democracy in Europe. And that's true. It's done both. But the teeth of the EU legal structure is in the economic area, and that structure is very much in the mode of the neoliberal gospel that we see embedded in "trade" treaties that are actually corporate-deregulation treaties.´ So despite the reality of the peace and democracy rationales, which I think are generally taken very seriously, the EU has no common foreign policy (to speak of), no common EU military, and a unanimity rule on major policies that make it extremely difficult to enforce the democracy part.

But the trade laws based on the deregulation-privatization model are enforceable in the courts. And the corporate lobbies aren't at all inclined to give up the advantages the EU structure brings them. Business regulation is dominated by EU laws and rules, but the various forms of social insurance - "social state" polices as they are also called - are the responsibility of individual countries, which given the way the European Supreme Court (EuGH) interprets the laws, creates heavy pressure to lower social-insurance protections toward the lowest common denominator. But it's not just the courts. The EU Commission, which is the EU executive body, has for years pushed member states to privatize their national health insurance programs, though fortunately most EU governments weren't so politically suicidal that they actually did much of it.

There's a lot of justified talk about the "democratic deficit" in the EU. I'm guessing that not even half of the voters in EU countries could correctly describe how laws are made by the EU Commission, the European Council, the Council of the European Union (not the same as the European Council!), and the European Parliament. For corporate lobbyists, this is a *desirable* state of affairs. Neither Merkel nor Macron have any intention of rocking that boat. And here's where the unanimity principle comes into play. If Macron and Merkel think it somehow looks good politically to advocate a common EU borrowing-and-subsidy program that they may not actually want, as long as they know that even one country will veto it, they are free to posture without having to worry they'll actually have to carry through. That way they can be the Good Europeans whose enlightened proposal got blocked by some annoying small countries.

Generally, the richer countries would prefer to have the vetoing country be one of the former "Eastern Bloc" countries. But in this case, the lowly Eastern countries want the money, so it's the Greedy Four  who are the sticks in the mud on this one. If Germany and France apply even a fraction of the pressure they applied to Greece, Italy, Ireland, Spain, and Portugal in the last euro crisis to enact austerity measures, the dissenters will come around. (Craig Crowther, 'Frugal Four' will come round to EU's €750bn COVID-19 recovery fund, says former Finland PM Stubb Euronews 05/28/2020) If Merkel and Macron don't apply that kind of pressure, we'll know they aren't serious. Since we're talking here about using public funds largely to bail out failing corporations and banks, it's possible that Merkel and Macron are serious on this one. Even staunch neoliberal austerians are true believers in "socialism for the rich."

Florian Gathmann et al, Auf den Kopf gestellt Spiegel Online 28.05.2020

Yanis Varoufakis is skeptical of the proposal, which he doesn't think will help with the problem the "periphery" EU countries like Italy face with pressure on their bond rates in a crisis. On the surface, the Merkron proposal is a move to make the EU more of a "transfer union". But the more critical problem is to make the eurozone (18 countries) a transfer union. That would mean things like have a eurozone-wide unemployment support program, for instance. Otherwise, the eurozone still faces the problem of the kind of tremendous pressure for internal devalution, i.e., lowering wages and living standards, that countries like Greece and Italy faced during the last eurocrisis. DiEM25 on Merkel Macron Announcement 19 MAY 2020:

There is an important geopolitical consideration in play with the "Merkron" proposal, as Wolfgang Münchau explains in China is pitting EU countries against each other Financial Times 06/24/2020:

China has shown remarkable skill in playing EU countries off against one another — for example in the race to develop 5G mobile networks. But this is just the beginning. China is well on the way to emerge as the most influential external power for the EU.

China’s Belt and Road Initiative, a project of long-term infrastructure investment spanning the Eurasian continent, lies at the heart of China’s global industrial strategy. EU governments understand this well. The Franco-German proposal for the €500bn coronavirus recovery fund includes a specific demand for an industrial policy to protect Europe against investments by third countries in strategic sectors. Yet such a strategy would pose problems for Italy, the likely main beneficiary of future Chinese investment in Europe. [my emphasis]

And Münchau's Eurointelligence looks more closely at the smoke and mirrors involved (Why it is not €500bn 05/29/2020):

When we read through the official document for yesterday's briefing, we were perplexed that the numbers did not add up - at least not in an obvious way. Further study of the proposal has revealed to us the reason why. The European Commission's claim that €500bn of the €750bn package comes in the form of grants is misleading. A more correct assessment is €400bn, which includes the €310bn grant element in the recovery plan and various bits and bobs, including an increase in structural funds. But it also includes components which the EU classifies as grants but whose ultimate incarnation is a loan. This is the Commission's old Juncker-fund reflex. It starts off by taking some real money and then leveraging it into a large loan. Whether this works or not is beside the point. Economically, this is not a fiscal impulse because it relates to claims that must be ultimately repaid. [my emphasis]

Europintelligence also argues that this is a clumsy attempt to backdoor a transfer-union function that really pertains to the specific needs of the eurozone:

... will the package survive the onslaught of the frugal four? The EU will need the consent of each of them to move ahead. They each will extract a price. On a per-capita basis, the frugal four are among the five largest net contributors to the EU budget. Leif Pagrotzky, a former Swedish economics minister, made the argument in Dagens Nyheter that Sweden should not veto the recovery fund, but argue that it is a eurozone-only instrument and Sweden should not take part in it. We agree with that argument. There is a lot of muddled thinking in Brussels about the nature of the monetary union, which is one of the reasons why the eurozone is stuck in a perma-crisis. The recovery fund is an economic necessity that arises as a direct result of countries having locked themselves into a permanent monetary union. It is not another regional aid programme.

The Dutch and the Austrians will have different objectives. We don't think they will want to veto the package, but the net economic gain for the EU as a whole is likely to be reduced through rebates for these countries. For example, if non-eurozone countries were allowed to opt out from the recovery fund, the refinancing burden on the remaining countries would increase, which in turn would reduce the extent of the fiscal transfer that is built into the package. [my emphasis]