Merkel's legacy at stake as Germany takes EU reins

Germany takes over the European Union's six-month presidency Wednesday, with outgoing Chancellor Angela Merkel staking her legacy on a massive economic recovery plan to help the bloc with the coronavirus fallout.

Merkel's last major role on the international stage comes as the 27-member club faces its deepest recession since World War II, triggered by a pandemic that has killed more than 500,000 people globally.

The crisis has galvanised Europe's most powerful leader who, with just over a year left in her final term, has ditched her usual wait-and-see approach to call for "extraordinary measures" to weather the storm. "Europe's future is our future," Merkel said Monday as she stood beside French President Emmanuel Macron to push for a 750-billion-euro ($843 billion) coronavirus recovery fund.

The proposed fund would controversially be financed through shared EU borrowing, which marks a stunning U-turn for Germany after years of opposition to debt pooling. The EU's rotating presidency is Merkel's "last chance" to make her mark as one of Europe's great leaders, Der Spiegel weekly wrote.

"For years the chancellor put off dealing with the chronic problems of the EU and the euro. Now, towards the end of her political career, she has the opportunity to make up for past mistakes," Spiegel wrote. There will be no shortage of challenges to tackle in the months ahead.

Post-Brexit negotiations, a more assertive China, rocky transatlantic ties, climate change and the conflict in Libya will all be jostling for attention, even if the pandemic promises to dominate the agenda.

'Extraordinary solidarity'

Germany kicked off its EU custodianship by projecting the words "Together for Europe's recovery" onto Berlin's iconic Brandenburg Gate late Tuesday.

A first test will come at a July 17-18 EU summit, where Merkel hopes leaders will reach an agreement on the 750-billion-euro rescue fund put forward by European Commission president Ursula von der Leyen -- Merkel's former defence minister.

The money is expected to come mainly in the form of grants for countries hit hardest by the pandemic, such as debt-laden Italy and Spain. But so-called frugal nations including Austria and the Netherlands want to rein in the spending and are insisting on loans rather than grants.

Merkel has urged holdout nations to "engage in an extraordinary act of solidarity", warning that an uneven recovery could undermine the EU single market and end up harming stronger economies too. If accepted, the rescue fund would be a milestone for EU unity.

It would also be a big win for Berlin, and could ease some of the lingering resentment from the eurozone debt crisis a decade ago when Merkel's government insisted on harsh austerity for struggling nations like Greece.

Brexit warning

Environmental demonstrators gathered outside the chancellery Wednesday with bags of fake euro banknotes to demand that any coronavirus stimulus be spent on "a green and just future". Economy Minister Peter Altmaier told reporters in Berlin that despite the coronavirus crisis, Germany supported the bloc's ambitious climate goals and the need to invest in green technologies.

Germany also plans to use its EU presidency to strengthen cooperation on health issues, he said, after the pandemic left member states scrambling to secure protective gear mainly made in China. The EU "must reduce its one-sided dependency in supply chains", Altmaier said.

He added that Berlin would fight to make progress on a long-stalled EU-China investment agreement aimed at levelling the playing field between firms on both sides. Another contentious issue looming large over Germany's time in the EU driving seat is Brexit.

After weeks of standstill, Britain and the EU have resumed negotiations about the country's divorce deal with the bloc.  Merkel has warned that the EU should prepare for the possibility of a no-deal Brexit at the end of the year. But she has also said that Britain would "have to live with the consequences" of weaker economic ties with the EU.