Eu Recovery Fund

The EU Recovery Fund: uniting and dividing Europe

Demands from souverainists and anti-European movements have been suddenly silenced by the latest maneuver in Bruxelles. Still, this new proposal comes with some doubts as to its consistency, mechanism and benefits. And the geopolitical reset that resulted from the pandemic has also introduced new euro skeptics into the political arena. Let’s take a look…  

On the 27th of May, the EU announced a new economic plan aimed at mitigating the tragic impact of the pandemic on our society. Ursula Von der Leyen, President of the European Commission, announced the economic relief procedure . She announced the recovery fund, having a value of €750 bn (£670bn; $825bn), as “Europe’s moment.”

This measure comes at the right time, or at the last possible moment. The European economies have been severely hit by the pandemic crisis. Still, some European members were already managing a difficult debt before Covid. It is no coincidence that those countries are the ones experiencing major distrust in Bruxelles’ institutions. Now, with the solid intervention of the Recovery fund, it is legitimate to wonder what the souverainists will argue about. With this new proof that the high layers of the Commission operate in the interest of the citizens and not their own, critiques vanish. And much political propaganda perishes, too.

Let’s take the Italian case as an example. Italian League leader Matteo Salvini and Brothers of Italy leader Giorgia Meloni have been the two most fierce antagonists of the European engine. Now that there’s no more ground on which to object to economic measures, they may want to swing public attention to other topics. At the moment, however, they keep going in their mission against Bruxelles. The right wing Meloni affirmed that the effort is not sufficient, and is only one step toward a better deal. Salvini remains even more skeptical. Until the money flows into the Italian deposit accounts, said the League leader, these will just remain the ”usual” European promises, which “we” are used to.

The money will flow, once the plan receives the approval. The new mechanism, also called “Next Generation EU,” links to the next EU budget 2021-2027 and will be worth a total of €1100 bn. It will be based on three pillars— supporting member countries, reviving the economy, and strengthening existing programmes. The criterion for redistribution and allocation of budget funds will be based on the different degree of impact the crisis has had in different countries. It will follow the EU cohesion policy. Hence, with EU funding going first to states and regions with a lower level of development (i.e., those whose per capita wealth is much lower than the European average), with a view to reducing the economic, social and territorial disparities.

Von der Leyen stressed once again the spirit of the plan in her speech to the plenary:

“The crisis has huge externalities and spillovers across countries. None of that can be fixed by any single country alone. A bankrupt company in one Member State, represents a reliable supplier gone for a business in another. A struggling economy in one part of Europe, weakens a strong economy in another part. This is about all of us. And it is way bigger than any of us. This is Europe’s moment. We see the economic, fiscal and social fall-out across our Member States. Divergences and disparities widen. Complex questions of sovereignty and burden-sharing have to be balanced. And so in front of us once again is that same binary choice. We either all go it alone; leaving countries, regions and people behind, and accepting a Union of haves and have-nots, or we walk that road together.”

Italy will be the member state receiving the most money, for the jaw dropping value of €172 billion—of which €81.807 bn will be disbursed as grants and €90.938 bn as loans. Second to Italy will be Spain and Poland receiving most of the financial aid. This determination, decided by Bruxelles, has left countries like Austria, Germany and Netherland clueless, rejecting the EU economic aid proposal as biased. 

In the early rejection from these EU member states, we discover new euro skeptical actors and trends, mirrored in both Dutch public opinion and the EW magazine. The cover of the EW magazine showed an image with Northern Europeans as stakhanovist workers and Southern Europeans enjoying their sun and a siesta. From a personal point of view, it is very funny: this is the same prejudice we have here in Italy, but on a larger scale. People from the North of Italy tend to be considered diligent and productive, while Southerns are considered lazy and unproductive. The world is a village at the end of the day.

Dutch magazine EW responds to EU Recovery Fund

But this resistance does not come at a good time. The plan can start only with the approval of all 27 EU member states. Given this key condition, von der Leyen’s words sound even more relevant.

But the EU recovery fund is not just about money. The plan has different tools at its disposal. First the Recovery and Resilience Facility (RRF), 560 billion, split between grants and loans and linked to the implementation of domestic reforms, will take place at the domestic level, following the agenda of the determined member state. Secondly, the React-EU tool: €55 billion channeled, differently from the first tool, to the territories most affected by the crisis. A €40 billion fund will be provided to support the territories most challenged in facing ecological transition. The Agricultural Fund for Rural Development will add additional funding of €15 billion for actions in line with the Green Deal.

Then, the Solvency Support Instrument will permit access to 31 billion. That could mobilise over 300 billion euros, starting this year, to support businesses that were healthy before the crisis. 

In the Recovery Fund there’s space to modify even the former Juncker Plan (now the InvestEU). This will provide 15.3 billion more so that, together with the Strategic Investment Facility, it can mobilise 150 billion of investment. Finally, the Eu4Health tool will open a new European health programme with 9.4 billion. The Horizon Europe mechanism will give 11 billion in additional funding to support research in Europe.

The upcoming European Council on the 17th and 18th of June is the first decisive juncture. Countries lik at which Austria, Holland, Sweden and Denmark will put their conditions on the table. These anti-Recovery fund countries will try to lower the total budget of the plan, in particular the grant aid. They will oppose the prefigured massive collection of money on the market and the introduction of new taxes. So that the Commission will reach the amount of 750 billion by temporarily raising their own resources ceiling of the common budget to 2% of EU Gdp. They will want strict external control over expenditure. Finally, they will defend the discounts they receive on national contributions to the multiannual budget, as they did long before the Covid emergency.

But in considering these conditions, or individual national interests, it is worth understanding the real value of the plan. This measure represents also a placebo. It could prevent and arrest those processes that are exploiting Covid and the economic crisis in order to overturn democratic principles and instaurate authoritarian regimes.

It is now up to member states to back up the EU proposal, universally. Otherwise, there can be no Union, nor willingness to constitute it.

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