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Mario Draghi’s call for the EU to continue to issue joint debt to finance key investments has deepened the divide in Germany’s already fractious coalition government and received strong criticism from the Netherlands, in a sign that some of the Italian technocrat’s proposals may not be politically feasible.
Draghi, a former head of the European Central Bank, noted in his highly anticipated report on the future of EU competitiveness on Monday (9 September) that “if the political and institutional conditions” are met, Europe should continue “building on the model of” its €806.9 billion pandemic recovery plan.
The NextGenerationEU (NextGenEU) programme offers member states grants and loans to make critical investments in exchange for targeted reforms, financed through debt jointly underwritten by EU member states.
Historically ‘frugal’ EU countries, including the Netherlands and Germany, are vehemently opposed to renewing NextGenEU beyond its scheduled expiry in August 2026.
“Joint EU borrowing will not solve structural problems: companies do not lack subsidies,” German Finance Minister Christian Lindner, leader of the pro-business liberal FDP, wrote on X on Monday. “They are tied down by bureaucracy and a planned economy. And they have difficulty accessing private capital. We have to work on that.”
Lindner’s appraisal contrasted starkly with that of Vice Chancellor Robert Habeck of the Greens, who described Draghi’s report as “a call to action for the new European Commission and the EU as a whole”.
“I am happy to pledge my support [for the report’s proposals]. Innovation, better framework conditions and the mobilisation of public and private investment are the order of the day,” Habeck, who also serves as the country’s Minister for Economic Affairs, said in a statement.
The ministers’ widely divergent opinions come amid protracted budget disputes between members of Germany’s ‘traffic light‘ federal coalition government, which is led by Chancellor Olaf Scholz’s social democrats (SDP).
Lindner, a well-known fiscal hawk, has repeatedly pushed for deep cuts in public spending to comply with Germany’s constitutionally mandated debt break – moves resisted by the Greens and the SDP.
The latest dispute also follows all three coalition parties’ disastrous performances in recent state elections in eastern Germany, which saw an historic surge in support for far-right and left-wing populist parties.
‘More money is not always the solution’
Draghi’s report received a more uniformly negative reaction from members of the Netherlands’ four-party coalition government, which includes the far right.
“More money is not always the solution,” Dutch Finance Minister Eelco Heinen, another well-known fiscal hawk and member of the conservative People’s Party for Freedom, was quoted by Dutch news agency ANP as saying.
A similar assessment came from Economic Affairs Minister Dirk Beljaarts, who hails from the far-right Party for Freedom (PVV) of anti-Islam campaigner Geert Wilders.
“Additional public investment is not an end in itself,” Beljaarts was quoted as saying. “[They are] only necessary in the event of unfair competition or market failure.”
Criticism of Draghi’s call for substantial increases in EU-level investments was also echoed by some EU diplomats.
“The discussion on further EU investments is one for the next MFF,” one EU diplomat told Euractiv, referring to the bloc’s Multiannual Financial Framework, or ‘regular’ budget. The bloc’s current seven-year €1.2 trillion MFF is set to expire in 2027.
Spain and France offer support
Draghi’s proposals, however, did receive support from other key member states.
Bernard Guetta, an MEP from French President Emmanuel Macron’s centrist Renaissance party, praised the report’s “French approach” to “giving up taboos over common defence, industrial policy and joint debt”.
“It is absolutely necessary to call on member states, the European Parliament and the future Commission to fully adopt the idea of industrial policies and joint investments,” he told Euractiv.
Guetta also urged member states such as Germany and the Netherlands to “open their eyes and put an end to their ideology” over joint borrowing.
However, he admitted that France, which was formally reprimanded by the European Commission for its high levels of public spending earlier this year, “is not the best-placed country to push this narrative out and convince other member states”.
“It is absolutely true that France is not the most credible member state to talk about joint EU financing, as its own public finances are in the red,” he said.
Guetta’s endorsement of Draghi’s key proposals was echoed by Spanish Finance Minister Carlos Cuerpo, whose country is one of the top recipients of NextGenEU funding.
“Like Draghi, we think that part of the required financing will necessarily come from the EU level. We share the urgent need to work towards a permanent EU common debt programme,” he told the Financial Times.
Theo Bourgery-Gonse and Nick Alipour contributed reporting.
[Edited by Owen Morgan]
