COVID-19 SPECIAL

Embattled Macron getting some tailwind from Merkel over bond designed to aid countries hit by Covid-19

By backing $775b bond, French President shows he is in sync with German Chancellor

German Chancellor Angela Merkel, in a sharp reversal, has agreed to financial aid that comes very close to the controversial so-called "corona bonds".

In a joint video conference with French President Emmanuel Macron, Dr Merkel on Monday supported the idea of creating a €500 billion (S$775 billion) bond designed to assist countries and industries severely hit by the Covid-19 crisis.

Germany has opposed any financial tool bearing common liability till now.

The funds for the new bond will be raised on capitals markets and, since the whole European Union will be the debtor and not individual countries, interest rates presumably will be rather low. The German share of this bond will amount to €135 billion. Interestingly, the disbursed money is not labelled a loan but a grant, which means recipients will not need to repay.

Dr Merkel and Mr Macron are well aware that their proposal will face resistance from other EU members, with both acknowledging that work is still needed "to bring together all the member states".

The Netherlands and Denmark have previously opposed the creation of "corona bonds" and so did Austria. The proposed €500 billion fund would come on top of the EU's next budget that has set aside loans totalling €540 billion.

The joint appearance with Dr Merkel came at the right moment for Mr Macron, who had the opportunity to not only demonstrate that he was in sync with his successful German counterpart but also display some leadership.

Mr Macron's popularity at home is hovering around a modest 40 per cent, a far cry from the 62 per cent he enjoyed three years ago upon taking office.

The French President's image has taken a beating lately with heavy criticism of his handling of the pandemic. More than once, he has labelled the fight against the disease a "war", thus raising public expectations. No other European head of state has used such strong language. However, it quickly became clear that French hospitals and doctors were ill equipped to win the so-called war.

With more than 28,000 deaths from the coronavirus, France is in the same category as Spain, Italy and the United Kingdom. Germany has a little more than 8,000 deaths.

Medical workers confronted Mr Macron with the facts on the ground when he recently paid a visit to the La Pitie Salpetriere hospital in Paris.

French President Emmanuel Macron and German Chancellor Angela Merkel at their joint video news conference on Monday, during which they supported the idea of creating a €500 billion (S$775 billion) bond designed to assist countries and industries se
French President Emmanuel Macron and German Chancellor Angela Merkel at their joint video news conference on Monday, during which they supported the idea of creating a €500 billion (S$775 billion) bond designed to assist countries and industries severely hit by the Covid-19 crisis. PHOTO: REUTERS

When talking to doctors, he admitted to a severe lack of personnel and supplies. Another hospital staff member later told Mr Macron he was not interested in awards for his work. Seemingly unfazed, he told the President: "We will not be fobbed off with medals."

The scene reminded observers of the aggressive "yellow vest" - a social movement fighting for more equality - protests in 2018 and last year that took much of the shine off the 42-year-old French leader.

Mr Macron, who in 2017 succeeded Francois Hollande in the Elysee Palace, also seems to have lost touch with the movement that helped him to fame.

While he has pledged to bring unity to French society, significant cracks have emerged in his political party La Republique En Marche (LREM), with a number of its deputies already quitting and signalling that they would be forming a new left-leaning faction in Parliament.

Only a few days ago, prominent deputy Aurelien Tache announced his exit with a particularly stinging remark for Mr Macron: "In 2017, I left the Socialist Party because it was unable to go beyond its borders. Today, I'm leaving LREM for exactly the same reasons."

The deputy from Val d'Oise, a region north of Paris, also said the movement "has not been able to build an ideological corpus, to find convergences with other parties or allies within society".

Representing the left wing of LREM, Mr Tache accused the President of "opening only towards the right".

On top of his political woes, Mr Macron will have to deal with a French economy that is expected to contract by at least 8 per cent this year.

In contrast, Dr Merkel is riding high at home with her popularity as well as that of her conservative Christian Democratic Union party soaring. Polling close to 40 per cent, the Christian Democrats are far ahead of other parties like the Greens or the Social Democrats.

Trust in Dr Merkel and the government is up mostly because of strong leadership that has kept the pandemic under control.

Simultaneously, the far-right Alternative for Germany (AfD) party, which many in the country feared was gaining momentum recently, is losing public support. It is embroiled in an internal dispute on the way forward. Trying to rid itself of extremist politicians in its own ranks, the AfD is facing an acid test that might eventually lead to a division of the party.

Political scientist Karl-Rudolf Korte said: "Chances are that the political centre will come out of the crisis stronger", while the AfD is "the biggest loser of the crisis".

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A version of this article appeared in the print edition of The Straits Times on May 20, 2020, with the headline Embattled Macron getting some tailwind from Merkel over bond designed to aid countries hit by Covid-19. Subscribe