Sport EU: the path full of pitfalls of the European recovery plan

05:10  29 may  2020
05:10  29 may  2020 Source:   rfi.fr

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La présidente de la Commission européenne, Ursula von der Leyen, doit présenter un plan de relance susceptible de rassembler les États membres de l'UE. © Olivier Hoslet / Pool via REUTERS The President of the European Commission, Ursula von der Leyen, must present a recovery plan likely to bring together the Member States of the EU.

The EU risks sinking in 2020 into the worst recession in its history following the Covid-19 pandemic. To deal with it, the European Commission unveiled an unprecedented recovery plan on Wednesday 27 May.

This is a moment if not historic, at least key, for the European Union, according to our correspondent in Brussels, Pierre Benazet . The European Commission enters the scene. Ten days after the new Franco-German proposal to pool debts on a post-coronavirus recovery plan at 500 billion euros, it is now Ursula von Der Leyen to put on the table a plan likely to bring together 27. A plan backed by the European budget, the start of difficult negotiations for Europeans, since unanimity is required, and a major test for the President of the European Commission. Amount, sharing of the debt burden, loans or grants: an overview of the annoying questions on which the 27 EU states will have to agree.

Emmanuel Macron and Angela Merkel propose a European recovery plan of 500 billion euros

 Emmanuel Macron and Angela Merkel propose a European recovery plan of 500 billion euros © Copyright 2020, L'Obs French President Emmanuel Maron and German Chancellor Angela Merkel proposed this Monday, May 18, a recovery plan in Europe 500 billion euros in the face of the economic impact of the new coronavirus, which would pave the way for the pooling of debts on the continent.

How much will it be?

If the Executive Vice-President of the Commission, Valdis Dombrovskis, spoke last week of a total volume "of more than 1 000 billion euros", the European Commission now remains discreet on its magnitude. Eight days ago, German Chancellor Angela Merkel and French President Emmanuel Macron proposed, to everyone's surprise, the creation of a stimulus fund with 500 billion euros. And Saturday, the Netherlands, Austria, Denmark and Sweden, nicknamed the four "frugal" , proposed an emergency fund but without fixing the amount.

Will there be a common European loan?

This is an extremely sensitive subject: the interest of pooling debts for the countries of Southern Europe is to benefit from the low interest rates of the Northern countries, known for their budgetary orthodoxy, and the good image of the Commission with the markets. At least part of the Commission's recovery plan should be financed by joint borrowing. The European executive should link this stimulus fund to the draft multiannual EU budget (2021-2027) to provide it with a borrowing capacity of 450 to 900 billion euros over three years, thanks to guarantees requested from Member States.

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 Coronavirus: Edouard Philippe © AFP "Very often, when the European crisis is there, it is in the capacity of France and Germany to agree and lead to finding the solution, "said the Prime Minister during the questioning of the government in the Senate on Wednesday. Edouard Philippe estimated Wednesday that the European Union had not "been up to the crisis" of the coronavirus , while welcoming the "very ambitious" recovery plan initiated Monday by France and the Germany .

So far hostile to a common division of the debt, Berlin has turned around and joined Paris eight days ago on this idea. An essential element that will weigh in future negotiations between the 27. Only the four "frugals" still loudly proclaimed on Saturday their opposition to a common EU debt.

Will the aid be grants or loans?

For countries in the South, such as Italy, whose debt is already exploding, repayment seems out of reach. The Commission's plan calls for a mix of grants - which need not be repaid - and loans. The European executive hopes to recover money by creating new European taxes (which could be, for example, a contribution linked to plastic waste).

In their joint proposal, Paris and Berlin speak of "budgetary allocations" to the regions most affected. The debt raised on behalf of the EU on the markets will have to be repaid not by the beneficiaries alone but by the 27 Member States according to their wealth evaluated according to their GDP: it is therefore a transfer to the countries poorer. But the four "frugal" do not want to hear about donations. They recommend credits at favorable rates within two years and under certain conditions.

Coronavirus: four European countries present their own economic aid plan

 Coronavirus: four European countries present their own economic aid plan © REUTERS / Leonhard Foeger Chancellor Sebastian Kurz's Austria and three other countries have presented a counter-proposal to the recovery plan proposed by France and Germany . The Netherlands, Austria, Denmark and Sweden presented their own proposal for an economic aid plan on Saturday 23 May. They want to help the European Union overcome the crisis while reaffirming their rejection of a mechanism for pooling European debt.

Where will aid go and on what conditions?

In everyone's opinion, the recovery plan should benefit "the sectors and geographic areas most affected" by the economic crisis caused by the pandemic. One of the goals is "to support investment, in particular for our main common strategic objectives - the green transition [...] and the digital transition", said European Commissioner for Economic Affairs, Paolo Gentiloni last Thursday. He also spoke of an opportunity "to implement the reforms which have long been necessary in several countries". In presenting the Franco-German proposal, Emmanuel Macron cited as an example of the assisted sector, that of tourism in Italy. He also spoke with Angela Merkel of "industrial projects to build European champions".

The four "frugals", for their part, argued that the money lent should be "directed towards activities that contribute most to the recovery, such as research and innovation, health and a green transition". They also call for tying aid to a "strong commitment to reform" and budgetary discipline, which Rome and Madrid reject. Virtuous countries in terms of public finances regularly worry about having to pay for those who are less so and who do not implement the reforms deemed necessary to make their economy more competitive.

► Read also: Coronavirus: the European Union in search of cohesion

(and with AFP)

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