The 27 EU member states were unable to come to a single decision on the economic recovery plan, which became necessary due to the damage caused by the pandemic. The European Commission should provide a plan for the allocation of 2,000 billion euros in May.
EU countries again failed to agree on measures to restore the economy after the pandemic crisis. The European Commission has developed a plan for the allocation of two trillion euros, but the key question remains unanswered: how and, most importantly, to whom will this money be sent?
The main controversy unfolds between the countries of the poorer and more severely affected by the virus of the South of Europe, led by France, and the North, where Germany sets the tone. After another demonstration of the incapacity of the European Union, representatives of the participating countries will meet again in May. Read the details in the material by Gael de Santima.
The 27 EU member states were unable to come to a single decision on the economic recovery plan, which became necessary due to the damage caused by the pandemic. The European Commission should provide a plan for the allocation of 2,000 billion euros in May.
As a result of the Covid-19 epidemic, EU countries will lose at least 7-15% of GDP … Nevertheless, with a plan for economic recovery, we will have to wait. Gathered on Thursday for a videoconference, the heads of state and members of governments were unable, as the week before their finance ministers, to reach a consensus. They failed to clearly articulate the EU’s strategy for overcoming the crisis and demanded that the Commission redo the plan by mid-May.
Trying to keep a good face, because the European bloc showed its futility in the face of a crisis, the leaders of the countries tried to present the proposed measures in all their grandeur.
“We will discuss everything very carefully. After all, this is not just about a few billion. It will be thousands of billions, ”said Ursula von der Leyen.
But this crisis, like the previous collapse of 2008 – 2010, showed a lack of unity in the European Union. Countries such as France, Italy and Spain called for the consolidation of national debt through the issuance of Eurobonds, which would open access to low-interest loans in the financial markets.
However, they met resistance from the Hanseatic League states (Finland, Germany, the Baltic states and the Netherlands).
A lot of money is at stake. On April 10, the Eurogroup announced that it had already allocated 540 billion euros as a subsidy fund to the EU budget for 2021 – 2027, which will replenish the cash reserves of states, enterprises, and also workers transferred to part-time employment. Yesterday, the heads of state and government approved this measure. In addition, at the end of May, the commission could submit a plan for the allocation of 2,000 billion euros, thereby tripling its multi-year budget, which will be 2% of the GDP of EU countries. This provided for a document on which a virtual meeting on the Euractiv.com platform took place on Thursday. According to Chancellor Angela Merkel, Germany is ready to invest more in the European budget, thus showing solidarity, but within a certain period.
How to finance? For example, you can increase the contributions of member countries, or, although this has not been done before, the EU itself could carry out loans in the market. The question is different: how to distribute allocated funds between states? How are loans? How are the subsidies? On this occasion, we also see differences between the countries of the south and the north. Italy, France and Spain advocated the principle of subsidizing countries most affected by the crisis. And the Hanseatic League countries opposed all sorts of “European transfers” in favor of the principle of a loan, despite the fact that this will certainly entail the need to service debt and a new wave of austerity policies.
Already during the crisis of 2008, these two approaches made themselves felt. Moreover, both of them are fraught with problems, as they leave countries to the mercy of financial markets. Supporters of European transfers are waiting for tax participation from Northern Europe in budgeting in the name of an illusory solidarity, so unfashionable today, and at this time neoliberals and far-right add fuel to the fire.
Hanseatic League countries praise the “golden rule” of the budget, the rejection of the deficit in order to support the euro and limit inflation. This approach will benefit large corporations, but at the cost of cutting back on the welfare state the population needs. Also, this does not contribute to the rapprochement of economies and living standards within the EU countries.
Southern and Eastern European countries need productive investments, as well as financing for industrial development, and these needs will grow due to the spread of the crisis due to the pandemic. These investments cannot be made only at the expense of tax revenues and will require the provision of new loans.
Another problem is that the EU countries have forbidden themselves in subsequent agreements to resort to the creation of monetary reserves of the Central Bank. In the USA, for example, there has always been a practice of providing loans to the Central Bank directly to states. Since April this year, the same rule began to apply in the UK. In this case, loans are given at zero or almost zero percent. And the ECB, on the principle of the German Bundesbank, prohibits this out of fear of inflation. It is because of this mechanism that the southern countries require a mutual distribution of debts, while the market offers them very high rates. And this is one of the things that must be done away with quickly.