Merkel urges EU unity to hold off economic fallout and populism

Merkel and her fellow EU leaders are due to meet next Friday and Saturday in Brussels to discuss the EU's long-term budget and the recovery package amid deep divisions.

Merkel said she took her first foreign trip after the pandemic to the EU parliament as the bloc faces its "greatest test in history", she said.

"The depth of the economic fallout calls on us to move quickly," Merkel said, adding that "nobody makes it through this crisis alone. We are all vulnerable."

"We must not be naive: in many member states, opponents of Europe are just waiting to misuse the crisis for their ends," Merkel said.

"We must show them all where the added value of cooperation in the EU lies, and we must show that a return to nationalism means not more, but less control," the German chancellor added.

She said we have seen lies and disinformation spread during the pandemic.

"We cannot allow hate speech, incitement to hatred, and populism to spread. Democracy needs facts and transparency. That is a hallmark of Europe," Merkel told MEPs.

Merkel said that for her, who lived for 35 years in an "unfree society" in Eastern Germany, restricting fundamental rights to stop the spread of the virus was a "very difficult decision".

Restricting rights was "a high price to pay as generations in Europe fought hard for those fundamental rights. Human rights, civil liberties are the most valuable asset we have in Europe," she said.

"A pandemic should never be used as a pretext to erode democratic principles," she said without naming any countries.

"European democracy requires open, critical debate. We don't want to stifle opposition. A democracy where religious, social, cultural diversity is silenced is not a true democracy," she added.

Merkel's forceful defence of fundamental rights as Europe's main asset came as she outlined her government's priorities for the EU in the next six months, including "digital sovereignty" and legally binding climate neutrality goals by 2050.

Homework

But the immediate task is to push for an agreement among the 27 governments on the €1.1 trillion budget and €750bn recovery fund proposal and to avoid the deepening of the largest economic crisis ever to hit the EU.

The economies of France, Italy and Spain are all estimated to shrink by more than 10 percent, according to the EU commission.

Germany has already taken a big step by proposing, with France, to create a one-time €500bn recovery fund filled through shared EU borrowing.

The commission's €750bn proposal to be distributed in grants and loans, faces tough resistance from countries dubbed the "Frugal Four" - Austria, Denmark, the Netherlands and Sweden -, which oppose grants and insist on economic reform in return for aid.

"It is very important that the worst affected regions can count on our solidarity, it is in our own interests to show that," Merkel said, adding that aid must not overburden the economically strong member states.

EU commission president Ursula von der Leyen said funds will be linked to economic reform based on recommendations worked out by the commission with the member states.

"Each and every member state has work to do. If we want to come out stronger from the crisis, we must all change for the better," she told MEPs.

European Council president Charles Michel, who will steer negotiations next week, is expected to present his compromise proposal to the EU capitals later this week.

He told MEPs on Wednesday that some of the elements in the commission's proposal were simply not acceptable to member states.

Michel said governments still disagree on the size of the budget and the recovery fund, the rebates - compensation for some of the net budget payers -, but also to what extent the recovery fund should be distributed through grants or loans, the criteria and conditions for funding, and new EU-level taxes.