A warm up to agree on the disagreements before meeting in mid-July to erase them. The European summit, which brought together the leaders of the 27 countries of the European Union, Friday, June 19 by videoconference, made it possible to clarify the positions of each on the historic recovery plan of 750 billion euros for the post-era Covid. And the least we can say is "that there is still a long way to go to reach an agreement", summarized Charles Michel, President of the European Council, in his letter of invitation to this meeting.

When German Chancellor Angela Merkel and French President Emmanuel Macron found common ground for the recovery plan on 18 May, Europe welcomed the return of the EU’s political engine to the front of the scene in favor of the coronavirus epidemic. But very quickly, a front of protest was formed, formed by the Netherlands, Austria, Denmark and Sweden. This club, which called itself the "4 frugal", seemed to question the generosity towards the countries economically most affected by the health crisis which wanted to show Paris and Berlin.

In reality, it's a little more complicated than that. "In fact everyone agrees for an economic recovery, but that gets stuck on the terms", summarizes Alexandre Baradez, responsible for economic analyzes for the financial consultancy IG, contacted by France 24. And the terms, there in spades.

Do you lend or give?

The main sticking point concerns the nature of money transfers to countries weakened by Covid-19. In the recovery plan, Angela Merkel wants 500 billion euros to be distributed as grants, while 250 billion euros would be available in the form of loans. 

The "4 frugaux" find that the amount of subsidies - that is to say money that will never be repaid - is far too high. They ask to reverse the logic of the Franco-German plan, or even to distribute only loans. "A credit encourages more to spend money intelligently", justifies a diplomat who preferred to remain anonymous, interviewed by the German daily Süddeutsche Zeitung.

But forcing Italy or Spain to borrow risks coming back to solving a problem - emergency access to funds - to create another, potentially more dangerous in the long term. "The Italian debt, already high, will not be sustainable if Europe mainly pays it funds in the form of loans", assures Alexandre Baradez. For this analyst, "the recovery plan will only be credible if it mainly includes endowments".

Money in exchange for what?

The Netherlands and their acolytes also stress that these transfers of money will have to be accompanied by strict conditions imposed on the countries which will profit from it. They believe that Europe should have a say in how the countries benefiting from the recovery plan will spend the funds since most of this money will come from the common EU budget. They want, for example, for the Commission to be able to force these states to carry out certain reforms in order to consolidate their finances.

It's the return of the old debate that had already divided Europe during the debt crisis in the early 2010s, when the EU was accused of imposing a drastic austerity policy on Athens as part of the plan safety. Except that "it is the Netherlands which today plays the role that Germany had played at the time of the rescue plan for Greece," notes Alexandre Baradez.

This time, Brussels seems less inclined to please the rich countries of northern Europe. EU recognizes that aid will have to be tied up, but the recovery plan essentially calls on countries to present spending programs to them and to prove that the investments made are "advancing the European economy" as a whole, underlines the German newspaper Süddeutsche Zeitung. 

Subsidies, but for whom?

It is not only the "4 frugal" who cringe. Several Eastern European countries, gathered within the "Visegrad group", fear of picking up only the crumbs of the immense war chest gathered to revive the European economy.

Hungary, Poland, Slovakia and the Czech Republic swallowed the wrong way when Angela Merkel and Emmanuel Macron specified who would benefit, as a priority, from European aid. The plan plans to pay Italy and Spain 172 billion euros and 140 billion euros respectively. 

They consider, in particular, that it is still a bit early to decide who are the main victims of the pandemic. "We think that the main criterion [to decide on the amount of aid per country, editor's note] should be the drop in GDP, and we will not be able to measure its magnitude until the beginning of next year", underlined Andrej Babiš , the Czech Prime Minister, at the occasion of a joint press conference with the countries of the "Visegrad group" in early June.

This call for patience seems hardly compatible with the urgency that there is, in the eyes of the promoters of the Franco-German plan, to release the funds. The chancellor has thus put pressure on her European colleagues so that the details of the aid program are finalized before the end of July so that national parliaments can ratify the text of the plan by the autumn. This calendar "would allow money to start transferring at the start of 2021, which may already seem late given the economic difficulties encountered by several European countries", underlines Alexandre Baradez.

It is not surprising, with all these disagreements, that this first summit does not lead to concrete decisions. "What is really important is that the most refractory countries make statements at the end of the meeting indicating that they are ready for concessions," notes Alexandre Baradez.

For this financial analyst, it would be a strong signal suggesting that a unanimous agreement is possible for this summer. And he considers it essential to set up European recovery as quickly as possible, because the continent's future is at stake in the great global competition. "When we look at what is happening in the United States, which is in the process of finalizing a recovery plan three times larger than ours, we cannot help but think that all the money mobilized by the Fed is not serves not only to save businesses, but also to give large groups the means to do their market internationally ", summarizes Alexandre Baradez. Clearly, he fears that if Europe does not quickly decide to come to the aid of its economy, Chinese or American companies will take the opportunity to buy European assets at a bargain price.

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