By World Healthcare Journal-
The EU Executive Committee has announced a new Covid-19 response & recovery fund, worth an enormous sum of €750bn ($825bn) as part of a revamped long-term EU budget. If combined with the EU budget for 2021-2027, the full amount will stand at a gigantic €1.85 trillion.
The coronavirus recovery fund, dubbed “Next Generation EU” requires backing by all 27 EU member states to go forward, and will be composed of €500bn in cash grants, and €250bn of loans in total. It aims to provide desperately needed financial relief, especially for poorer nations in the EU who were already saddled with debt before the pandemic began.
“The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future,” says European Commission President, Ursula von der Leyen, adding that "this is Europe's moment".
The proposal itself has been met with a positive response from the Southern EU nations, with Italian PM Giuseppe Conte dubbing it via Twitter an “excellent signal from Brussels, it goes right in the direction indicated by Italy,” adding his desire to “speed up the negotiation, and free up the resources soon. ”
Spain, the worst-affected nation in the EU by confirmed cases, also welcomed the proposal, with PM Pedro Sanchez noting that it “met many of our demands,” and that the EU “must soon reach an agreement to access resources. ”
However, not all nations are happy with the plan. President von der Leyen must convince the “frugal four” nations of the EU to accept the proposition - notably Austria, Sweden, the Netherlands and Denmark, who have been opposed to the plan, arguing that low-interest loans should make up the majority of the fund instead of direct cash grants.
Furthermore, Finland has now indicated it is not yet content with the plan, as well as the Czech Republic - which is projected to enter a period of sharp economic decline in 2020 worth -6.7 per cent GDP, slightly decreasing to -4.2 per cent in 2021.
Understandably, these countries do not want to take on “unnecessary” amounts of debt - and Czech PM Andrej Babiš has stated that he believes borrowing should be limited to the amount of economic decline due to coronavirus - which he estimates will be around 10 to 15 per cent.
The fear which the “frugal four” have surrounding direct cash grants is primarily due to their funding model - the grants will be financed through joint-borrowing between EU nations, and the borrowing must be repaid - which means more impact on individual economies and higher, or new taxes to the EU down the line - such as a carbon tax, originally proposed in 2018, a new “digital” tax, or one for single-use plastics.
Furthermore, many nations are worried that engaging with nations who have high amounts of public debt would pose too much risk to their own financial systems - potentially leading to further damage, as opposed to efficient recovery. Dutch PM Mark Rutte agreed that a fund was necessary, however, he believed that it should consist of “loans, without any mutualisation of debts,” - a sentiment shared by Austrian Chancellor Sebastian Kurz.
This has further stoked growing tensions between the southern nations of Europe, who have been hit particularly hard by the virus and were in relative worse economic standing before the crisis, and the richer northern EU nations, who have been perceived as “not doing enough” to help worse-affected states.
A prime example of this growing discontent can be seen in a recent poll from Redfield & Wilton Strategies who reported that more than 70 per cent of Italian participants believed that the EU has not done enough to help during the crisis, which is notably higher than the 57 per cent of those who shared the sentiment in France.
This dissent may exacerbate rising support for nationalistic anti-EU political parties in the south, who were growing in popularity before the crisis, and have now been likely been bolstered through the damage the pandemic has caused; not to mention the “frugal four” nations which may see a rise in anti-EU sentiment due to their disinclination to funding the high cost of the new fund.
Furthermore, many of the southern nations rely heavily on tourism, which has been decimated by Covid-19. Yet still, the tourism industry is showing preliminary signs of recovery from the pandemic. Greece, which is projected to have the highest recession due to Covid-19, has announced the first whitelist of countries that will be allowed to travel there for pleasure - expected to begin on July 1st.
Spain has also announced the reopening of international tourism from the same date, with tourism businesses stating that bookings have risen by 400 per cent since the PM urged people to “start booking their summer holidays,” in an official statement. Turkey, and Portugal have also announced that they will reopen their tourism industries this summer.
However, the question remains if the influxes of tourists will benefit nations in the long term. If restrictions, hygiene, and social distancing measures are not adhered to by holidaymakers, tourism-heavy nations could see a further rise in coronavirus cases within their own populations and also within the international tourist cohort - which would likely cause far more damage than keeping the tourism industry closed.
Overall, a compromise and consensus on the EU fund is still likely weeks away - diplomats do not expect much further progress until July, when the EU Presidency will rotate to Germany.
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