So there's lots of excitement about Merkel's comments today. But I don't think she's really moved the needle much. All she's done is endorse the plan @vonderleyen was planning to present on Thurs. Yes, there's Bxl-Berlin co-ordination. Thread, based on chats 1/
So the leaders meet on Thurs is all about "pillar 4" - mutualization. Ideally, @EmmanuelMacron & South want to toughen up language from Eurogroup 2 weeks ago on "Recovery Fund." @Europarl_EN supports this move, but @vonderleyen has a different plan 2/
Her basic idea is to use EU budget (difference between payment & own resources ceiling) to increase amount @EU_Commission can borrow. Problems: need parliamentary ratification in all EU27 capitals to raise own resources ceiling. Will take at least a year 3/
Could this be gotten around by member states front loading guarantees = difference between the two ceilings (~€150-160bn?) Locking up monies in their Treasuries? Perhaps 4/
But given 🇳🇱&🇫🇮 parliamentary opposition to fronting their capital guarantees for SURE - which is essentially the same template for @vonderleyen EU budget plan - the signs aren't promising 5/
.@EU_Commission also wants to build on SURE ("super" SURE); use EFSI/@JunckerEU plan & create vehicle to take equity stakes in struggling companies/industries of strategic relevance to Union. This is the 4-pillar plan of pillar-4 that @vonderleyen will seek blessing for on Thurs
Hence Merkel's comments are endorsement of what @EU_Commission was already planning; a move to support @vonderleyen objective of ensuring EU budget is front & centre of EU's economic recovery. To arrest momentum behind new Recovery Fund or anything outside existing structures /7
French sources suggest @EmmanuelMacron will go along with the @EU_Commission initiative for now; they recognise this is not a breakthrough. But he & Southern coalition he leads will likely keep a "plan B" in their pocket if these discussions run into the sand 8/
The key objectives for Paris are to ensure that the "4th-pillar 4-pillar" plan delivers 1) sizeable amounts of money; 2) quickly & 3) that it is genuinely redistributive - so it goes to the member states that need it the most - 🇮🇹& 🇪🇸 etc 9/
Also don't want to saddle vulnerable member states with more debt. But for now, it's doubtful that the money raised by the @EU_Commission will be transfers (or else who would pay the markets back?!) 10/
Because the plan has clearly been somewhat pre-cooked between Berlin, Paris & Bxl, I think the biggest risk/opposition is likely to come from the “Frugal-4” (the Netherlands, Sweden, Austria & Denmark), which remember, since Brexit, *no longer follow 🇩🇪 on EU budget issues* 11/
So EU leaders likely to endorse @vonderleyen plan for the time being. This is not a €bond. This is an attempt to replicate the effects of €bonds/Coronabond through multiple existing instruments. If @vonderleyen wins leaders backing, expect formal proposal on 29 April ENDS
