The heads of state and government of the 27 have formally endorsed this Thursday the creation of an Economic Recovery Fund that will be linked to the Multiannual Financial Framework , the EU Budget. Like almost everything that happens in the EU, and especially at the highest level, the flavor is bittersweet. It was a necessary step, essential, but not sufficient, because the details of it are yet to be defined. If measured against the street parameters, of the millions of people affected, the reaction seems insultingly slow and scarce. Compared to previous crises, in which decisions of this depth cost up to four years, it is a historic success. In speed, amount and structure.

The pressure today is very strong. The president of the ECB, Christine Lagarde , after asking again and again for a fiscal action at the height of the circumstances, picking up the witness of what Mario Draghi also claimed ad nauseam, has wanted to make it clear again this Thursday with a shake : Their forecasts speak of a contraction of 5% in the most benign scenario, of 9% in an intermediate one and of up to 15% in the most serious . Data much harder than that of the IMF, the Commission or even the Bank of Spain for the national case. And on that stage the top leaders have had to navigate

To calibrate well, two categories must be distinguished: what leaders have done and what they have not. To begin with, they have approved the triple safety net of more than half a billion euros agreed by the Eurogroup a few days ago. With liquidity lines for States, companies and jobs . And, importantly, they have set a clear date for when the money must be available for all those who want to resort to loans on favorable terms: June 1.

In addition, they have agreed on the creation of this Recovery, Reconstruction, and Solidarity Fund, as they prefer to call it. Something that seems evident today but that a few weeks ago sounded very strange in certain latitudes, where they do not even accept the possibility of credit lines without macroeconomic conditionality or for medical expenses. "We have agreed to work on a specific recovery fund dedicated to the Covid-19 crisis. It is necessary and urgent, and it must be large enough to deal with this crisis. It must be focused on the sectors and geographic parts of Europe most affected. "The President of the European Council, Charles Michel, pointed out at the end.

Furthermore, all have more or less agreed that the EU's Multiannual Financial Framework for the period 2021-2027 should be the umbrella that shelters it or nourishes it with resources. "There is only one instrument that can be that size. Everyone trusts it, we all know it, it is designed for investment, cohesion and convergence," said the President of the European Commission, Ursula von der Leyen , very satisfied that the main control falls on their domains. The German has assured that she will take advantage of that unit of thought "to explore innovative financial instruments ", an expression that serves to please everyone without getting wet and not even touching on taboos such as mutualization or Eurobonds.

At the moment, without figures from the Fund

There is no formal figure for the size of the Fund, but the Commission has circulated several documents these days with a reference amount: at least one and a half billion euros, which analysts believe could lead to the disaster after weeks of confinement. . "The budget for the next seven years must adapt to new circumstances. We must increase firepower and for this we will propose increasing the fiscal margin, the space between the current spending ceiling and that of own resources," insisted the German.

His idea is to raise that ceiling of own expenses from the 1.2% currently set to around 2% in the coming years, which would allow the Commission to look for money in the markets with issues of up to 320,000 million euros, which in turn would mobilize almost five times that amount. The distribution of money, if it is done by the usual criteria of GDP and population or by the impact of the crisis and unemployment. If they focus on investment or other things. Whether there is a specific industrial heading, whether ecological or digital is weighted or new avenues are opened is a matter of debate.

In what format? The logic is clear, a "mix of loans and transfers", but not the formula. "There is a variety of opinion, it is a matter of negotiating between countries. There are pros and cons for all possibilities, we all know the arguments," he said. Northern countries want the majority of loans to be repaid, although they must be in the very long term as a concession. The countries of the south, and France, demand that they be transfers, the more the better, to mitigate what is inevitably going to be an impact and an asymmetric recovery.

"We know that GDP will fall everywhere, but more in some places than in others and there will be more damage to tourism than in other sectors. Likewise, the fiscal impact will be different as some states can provide more direct budget support than others. the date 1.8 billion euros in state aid, but there are many inequalities, "recalled Von der Leyen

A number of recent studies by top-tier economists are circulating these days in Brussels, highlighting how heavily indebted economies tend to react less powerfully than less leveraged economies in the face of major shocks. And although the underlying logic is understood, the consequences end up being worse. So Lagarde's message today has been that you cannot act late or too cautiously, as in 2008 or 2010. What better to apologize for exceeding than permission to break conventions, but expressed in a much more professional way.

In order not to get lost, you need the compass to point to Berlin. "We do not agree on all points, but we do agree to work together." German Chancellor Angela Merkel never graces her remarks. It does not put drama, it does not put literature. His are inconspicuous headlines about the European Councils, but the summaries tend to be accurate. It does not get wet on what the exact package should be, but what they are not willing to accept. And there is rarely dissonance with the end result. Merkel has said no to Eurobonds, but opened the door to some issues with European instruments. He supports solidarity and yesterday gave that his country is ready to significantly increase its contributions to the EU Budget for 2021-2027, something that in January and February was flatly denied.

This is where the so-called 'landing zone' goes. The Commission and the Eurogroup will work in the coming weeks to materialize proposals avoiding vetoes and bypassing red lines. On May 6, the leaders will meet again. The technical effort is likely to require much more margin, but at least the line seems fairly defined.

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  • European Comission
  • Spain
  • Ursula von der Leyen
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