EU heads to meet over next budget, COVID-19 recovery
EU leaders will gather today at the European Council in Brussels to seek an agreement over a proposed $850 billion pandemic recovery fund and long-term budget.
Despite strong backing from France and Germany, the EU has failed to reach an understanding thus far. Italy and Spain, among others, have pushed for robust intervention in the form of grants while the “frugal four”—Austria, Denmark, Sweden and the Netherlands—have instead advocated a loans-based package.
Failure to reach a consensus today could undermine hallmarks of the European project. Pandemic-induced economic turmoil has exacerbated existing fiscal and monetary disagreements, which could undercut both the single market and the eurozone. The perceived failure of the EU to meet desperate pleas for aid by the hardest-hit member states have heightened Euroscepticism across the bloc. There is concern that an inability to enact a recovery fund could risk the EU becoming “irrelevant,” significantly diminishing its credibility among European citizens. As such, Germany—typically a bastion of frugality—has thrown its weight behind a generous relief package.
Expect some sort of arrangement to be finalised soon. While discussions this weekend may fail to break the impasse, a second meeting has been set for the end of July if necessary. Any agreement will feature a mélange of grants and loans in a compromise accommodating both tight and pro-stimulus factions.
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