EU disintegrating as German economy could ‘threaten monetary union’

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The EU, like other economies around the world, has been grappling with the consequences of the coronavirus pandemic. Earlier this year, the bloc came to an agreement for a £675billion (€745bn) recovery fund to help respond to the contractions in the eurozone. The agreement was only made after arduous negotiations, in which northern European countries put up more resistance to increased financial support. This caused anger from southern European nations, as well as French President Emmanuel Macron, causing the EU to search for a compromise. But eyes have now turned to the recovery phase.

Historian David Marsh told Express.co.uk that if Berlin is perceived to be recovering quickly in comparison to other EU nations, the eurozone could be under threat.

He said: “I think the pandemic in the short term has increased solidarity rather than decreased it.

“But if Germany recovers at a much stronger pace than the other EU countries, then this will pose enormous difficulties to the monetary union.

“The Germans would like to have higher interest rates while many other countries in the eurozone would like interest rates where they are probably for the next 10 years.

“So, problems could be posed if there is an uneven pace of recovery. And it looks as though that might take place.

“The question for Germany is – do they take the fruits of recovery and haul it all for themselves or do they spread it around to alleviate the woes of other countries?”

This threat seems to have been eased as Germany’s economic recovery encounters stumbling blocks.

Last month, Germany’s economic prospects for 2020 started to appear increasingly bleak, with the country’s leading research institutes downgrading GDP (gross domestic product) forecasts for this year and beyond.

Germany’s prominent economists warned that the coronavirus pandemic is leaving what they called “substantial marks” on the German economy, adding that “its impact is more persistent than assumed in spring”.

The downgrades came after the second wave of the pandemic hit some parts of Europe hard.

Nevertheless, Mr Marsh warned that the crisis could lead to divisions in the eurozone for different reasons, with some states maybe even splitting from the monetary union.

He continued: “Sometimes crises lead to people coming together more – there’s the old adage that Europe is ‘forged in crises’.

“But of course you can have a crisis too far, and some crises end in the whole thing – in this case monetary union – blowing up.

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“I think both of these possibilities are out there, and it’s difficult to tell which one is more likely.

“There is a chance the whole thing will come to an end, because the legitimate demands of the southern states won’t be possible for the northern states to meet, which could conceivably lead to a southern state leaving.

“The northern states could even depart as a bloc.”

The historian did argue, however, that it is more likely that a “transfer union” could be formed, seeing wealthier nations support their less economically stable neighbours.

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