How much money should the future EU Economic Recovery Fund contain? How to distribute it among the countries affected by the Covid19? Through loans or subsidies? Between which sectors and countries? These are some of the questions that still do not have an answer and will probably not be answered this Thursday, during thefourth summit in seven weeks held by the EU Heads of State and Governmentby videoconference since the pandemic broke out. The appointment, however, is key for European leaders to clear once and for all their political commitment to aeuropean investment planand give a mandate “as clear and powerful” to the European Commission to present a proposal as soon as possible.
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The Executive who leadsUrsula von der LeyenFor weeks, he has been outlining a shock plan to revive the European economy with a number in mind: mobilize 1.6 trillion euros over the next three years, through the issuance of community debt, and using theMultiannual Financial Framework (MFF)for the period 2021-2027 as a lever to obtain resources in the markets. Brussels’ idea to increase the available financial capacity, and achieve that additional financing, is to raise the maximum spending ceiling to close to 2% of the Gross National Income (currently 1.23%) to improve the Commission’s capacity to raise funds at low interest.
A totally open approach for the moment and that could be put on the table as soon as next April 29, once it receives the guidelines of the European leaders this Thursday. Everything will depend on the conclusions of the “strategic discussion” that the Twenty-seven will hold from three o’clock on Thursday afternoon, although it will be afirst discussion that will require new meetings. “Theoretically it is a viable idea but we will see why it not only requires unanimity but also the ratification of parliaments”, hold diplomatic sources on the modification of the EU’s own resources. The same sources acknowledge that an agreement before June or July will be difficult, not only becausethere is still no consensus on how the fund should bebut because of the inability of the EU leaders to meet and the difficulty of “negotiating at a distance”.
A “powerful” and “urgent” fund
At this point, hardly anyone disputes that it will take a powerful recovery fund, with a “significant” fire capacity, torevive the European economy-although some countries such as the Netherlands consider that it is early to put figures on the table- nor that the situation is of utmost urgency because“the coming crisis will be enormous and cannot be underestimated”, argue the same sources. The starting point of some countries and others, of the group of the so-called frugal -Holland, Austria, Denmark and Sweden- who defend a budget as austere as possible, or of the friends of cohesion -Spain, Italy, Portugal or France- However, it is not the same, although the tensions experienced in the last Eurogroup, when it took two days to close the triple emergency safety net, seem to have disappeared.
“The atmosphere in the contacts has been good,” say sources close to the President of the European Council,Charles Michel, which last Monday organized a preparatory meeting attended byGiuseppe Conte(Italy),Emmanuel Macron(France),Angela Merkel(Germany),Mark Rutte(Netherlands) andPedro Sánchez(Spain) that served to recover the lost tone. Precisely that day Spain distributed a proposal among the rest of the European partners that advocates creating a recovery fund of 1.5 billion euros, financed through the issuance of perpetual debt, and which would give subsidies, and not repayable loans, to countries affected by covid19 from 2021.
Perpetual debt collides with the north
“The possibilities ofreconstruction of Spainwill depend on the existence of a largereconstruction plan in Europe. We went to the European Council with a pragmatic, effective and essential proposal that would demonstrate the real intention of the EU to act with real scope, “Sánchez defended this Wednesday in Congress. His plan forperpetual debt and lost fund transfersHowever, it has little chance of flying. “It would be great, but it will not fly. It is enough to be 10 minutes in the Coreper (meeting of permanent ambassadors) to realize it. The Nordic countries would never accept it,” say sources from one of the “friendly” countries.
“There are hard words to swallow and ‘perpetual debt’ is a very difficult thing for some Member States to accept” but “I think the idea of (repayable) long-term loans has a good chance,” explain other sources about the discussion between loans and grants.“We need loans and grants. There will be both.”, they add, underlining the importance of avoiding fragmentation of the internal market and reaching an agreement that allows for rapid action. Beyond talking about recovery, the leaders summit, which they will also attendChristine Lagarde (ECB) and Mário Centeno (Eurogroup),It will also endorse the half a billion euro emergency plan agreed by the Eurogroup on April 9 to respond to the crisis in the short term and will urge the Eurogroup to make the three new tools operational on June 1.