- At the end of a colorful marathon negotiation, the Europeans have agreed on the 750 billion euros devoted to economic recovery as well as 1.074 billion euros dedicated to the European budget for the years 2021 to 2027.
- French President Emmanuel Macron hailed a "historic day" for the European Union. For the first time, the European Commission will be able to issue common debt and help the countries most weakened by the crisis with additional subsidies.
- However, this new step, which strengthens European solidarity to respond to the consequences of the crisis, does not surprise the observers of the EU.
They finally gave birth to an agreement that was not far from failing. While the summit was only to last two days, the negotiations extended over five days, closely following the duration of the 2001 Nice summit. This Tuesday morning, the heads of government finally gave birth to their recovery plan as well as the European budget for the years 2021 to 2017, respectively amounting to 750 billion and 1.074 billion euros.
A “historic” day, tweeted Emmanuel Macron. A "turning point for the history of Europe", trumpeted this morning the President of the European Council Charles Michel, on France Inter . To respond to the crisis caused by the coronavirus pandemic, the Member States of the European Union are concluding a recovery plan which, in addition to offering 360 billion euros in loans that it will borrow for the States, includes 390 billion euros in subsidies. A total amount financed directly by the European Commission, which will be able to raise this amount itself on the markets.
New European solidarity
“The Commission has already borrowed money, but to lend it and not to subsidize. This is what is innovative. A recovery plan with 750 billion euros in loans would have gone quiet. The real part is the subsidy ”, comments Yves Bertoncini, teacher in European issues and co-author of European Policy: States, Powers and Citizens of the European Union (Presses de Sciences Po, 2010). Progress torn off after a hard fight: while France and Germany offered 500 billion in subsidies, they obtained 390, having to give in to the "frugal" opposed to the very principle of European debt.
"This agreement shows that the European Union is united", comments Grégory Claeys, of the Brussels think tank Bruegel, specializing in economics. The money raised by the European debt will make it possible to supplement national stimulus plans, including those that have been most weakened by the crisis, such as Italy or Spain. With such a system, "there will be transfers from the rich countries to the countries most affected by the crisis", explains Grégory Claeys.
For its part, France should receive 40 billion euros in subsidies, announced Bruno Le Maire. But France should also contribute more to the European budget, because of Brexit, which reduced the EU's resources and additional discounts granted to the Netherlands, Austria, Sweden and Denmark.
Impact on financial markets
By partially reducing national debts, this mechanism has another advantage according to Grégory Claeys: by the markets' confidence in the ECB, which will buy European debt and the European Commission, which will issue it and is rated "triple A" , this eurobond (European bond), which must be repaid by 2058,helps keep interest rates on national debts low, especially those of particularly weakened countries like Italy. One way to protect against a sovereign debt crisis like the one that hit Europe from 2010.
And if "loans" from the stimulus plan (the 360 billion euros) are used, their financing conditions will be more advantageous for European countries whose spread (the rate differential with solvent debts, such as German debt) is high. As for France, which is borrowing at the moment at negative rates, the advantage is not obvious. However, such a remedy would be "a possibility, but we are not sure to use it", we explain to Bercy.
The "frugal" have folded
So much for the financial part. But politically, the recovery plan also marks another notable development. If the frugal countries were able to obtain rebates in terms of their net contribution to the European Union budget, "those who are more against Eurobonds have ended up accepting financial solidarity", remarks Sylvain Kahn, historian professor at Sciences Po, specialist of European construction. The twists and turns that punctuated this summit, between on one side the rants of Emmanuel Macron and on the other, the Dutch Prime Minister Mark Rutte asking to re-inflate the tires of his bicycle (anecdote recalled by the specialized site Context ) , are not surprising in this regard. "There are no negotiations without arm wrestling and bargaining," he underlines.
According to the historian, the recovery plan is a “big step” in European construction. The principle of a common indebtedness, accepted today with regard to the resolution of the economic crisis, is an idea put forward in France since the beginning in the 2000s, recalls the historian, both in think tanks left than right. Without succeeding then, the subject had been "pushed at the time of the sovereign debt crisis".
Nothing a miracle
However, if Emmanuel Macron will capitalize on this European victory, France cannot, according to the historian, pull the cover on such a step on its own. “What happened this weekend actually started in April, when the European Council unanimously validated the principle of a recovery plan. In March, everyone, including the Dutch, unanimously suspended the Maastricht budgetary rules, ”recalls Sylvain Kahn.
This new step towards more European integration is also consubstantial with the very logic of European construction. "It is by no means a miracle", explains Sylvain Kahn, who speaks on this subject of "ratchet effect" making backtracking impossible. European economies have become so interdependent that European institutions are forced to react in a crisis, as they already have with the ECB's monetary interventions to support the euro area in recent years. “There has already been some feats,” said Yves Bertoncini for his part, recalling this previous episode.
The next step in own resources
With the recovery plan, “we have just taken a step forward. If ever there is a crisis of the same magnitude, the Europeans will be able to rely on this precedent, ”he believes. It remains to be seen whether this crisis will provide an opportunity to go further with the European Union's own resources.
Our dossier on the European Union
In addition to a tax on non-recycled plastic which would be created in early 2021, the European Commission will propose a "carbon mechanism" aimed at increasing the cost of imported polluting products as well as a proposal for a "Gafa" tax. “There is going to be a strong incentive to adopt these taxes. It will be an additional step in federalism, but there are countries which do not want this ”recalls Yves Bertoncini.
Economy
EU recovery plan: 40 billion euros in subsidies for France, a plan denounced by the opposition
- Emmanuel Macron
- Covid 19
- Economy
- Recovery plan
- EU
- Coronavirus