Scholz Brushes Off Talk of Further Joint EU Borrowing — for Now

Olaf Scholz, Germany's chancellor, at a news conference at the European Union (EU) headquarters in Brussels, Belgium, on Friday, Dec. 10, 2021. Scholz said a Russian invasion of Ukraine would trigger reprisals, the latest warning to President Vladimir Putin from Western leaders, though he declined to specify if halting the Nord Stream 2 gas pipeline would be part of any response. , Bloomberg

Michael Nienaber and Patrick Donahue, Bloomberg News

Jan 17, 2023

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(Bloomberg) -- German Chancellor Olaf Scholz said he still embraces the “Hamiltonian” spirit of deeper fiscal integration for Europe, but he brushed off the idea of more joint borrowing, for now at least. 

The German leader touted his role as “one of the architects” of the joint bonds underpinning the European Union’s €800 billion ($862 billion) pandemic recovery fund in an interview on Tuesday in Berlin. He said the program had convinced markets that EU member states “will stick together.” 

“I still feel Hamiltonian, but I was very clear what I thought it should be,” Scholz told Bloomberg Editor-in-Chief John Micklethwait. The pandemic financing, however, “was just restricted to this one moment.”

European politicians have taken to referencing the first US treasury secretary, Alexander Hamilton, to underline the scale of their ambitions as they inch, uncertainly, toward the fiscal union that many economists say is required for the European single currency to work over the long term. 

Hamilton, made popular 200 years after his death by a Broadway musical, pushed through federal borrowing for the first time to repay debt incurred by the states during the Revolutionary War.  

The idea of joint EU borrowing is anathema to some German conservatives, who were ousted from the chancellery by Scholz’s Social Democrats in 2021. The pro-business Free Democrats — a junior member of his ruling coalition — also rejects the idea, so the chancellor has been cautious not to provoke a backlash by pushing European integration too far or too fast. 

All the same, Scholz’s party last week called for the EU to examine new joint financing instruments to help the bloc compete with the US as it backs green technology. The SPD wants to see a reform of the EU’s existing state-aid rules and more funds to match the US green-aid push. 

Scholz wouldn’t be drawn on whether he supports that specific plan, but he emphasized that there are still significant amounts of money to be tapped from the recovery fund if member states can satisfy the conditions. 

“We have a lot of money still there to be used,” he said. Europe’s Hamiltonian moment, he added, is “a bit different from the historic situation of the United States.” 

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