Economy & Politics

EU budget So the EU wants to rebuild the economy after Corona

EU Commission President Ursula von der Leyen at a press conference in mid-April. On May 27, she presented the Commission's proposal for the new EU budget and a recovery program to help people recover from the Corona crisis
EU Commission President Ursula von der Leyen at a press conference in mid-April. On May 27, she presented the Commission’s proposal for the new EU budget and a recovery program to help people recover from the Corona crisisimago images / Le Pictorium

You agree that you disagree. This is how one could summarize the previous discussions about the EU budget. And there were already differences of opinion in advance for the latest plans for the EU’s Corona aid. The EU Commission is now planning a new budget of 1.1 trillion euros for the years 2021 to 2027 – and plans to supplement this financial planning with a 750 billion euro reconstruction fund.

The “Next Generation EU” development plan behind this is based on a compromise. Two thirds of the money should go to grants to countries and regions in need – and do not have to be repaid. 310 billion euros are intended for investments and reforms for economic recovery. The proposal thus resembles the initiative of Chancellor Angela Merkel and French President Emmanuel Macron.

The remaining 250 billion euros are to be granted as loans for investments and reforms. That was what the “economical four” consisting of Austria, the Netherlands, Sweden and Denmark had requested in their counter-proposal to the Franco-German initiative.

Promote the domestic market, drive the green deal and digitization

In terms of content, the EU Commission intends to invest in three areas with its budget in the future: in the European economy and in particular the internal market, the European environmental strategy and the expansion of digitalization. The reconstruction fund has earmarked 15 billion euros for these areas. The “Invest EU” investment program should also make 150 billion euros available for strategic investments in these fields.

For EUR 9.4 billion, the EU Commission also plans to set up a European health program called “EU 4 Health”, which is intended, among other things, to ensure provision for future health crises. The Cohesion Fund and the Agricultural Fund are also to be increased – the former by 55 billion euros, the latter by 15 billion euros.

The aid is to be financed through loans that the EU Commission borrows on the capital market. The EU budget’s own resources ceiling should therefore be increased to two percent of gross national income. New income from taxes and levies are already under discussion. The member states should guarantee a share of contributions. The repayment should then take place jointly in the households between 2028 and 2058. In order to be able to use more money already in progress, the Commission is also proposing to make an additional 11.5 billion euros available in 2020.

The EU has already taken these measures

Meanwhile, the EU is expecting economic output to drop by 7.7 percent this year. The 27 EU member states must discuss whether the proposal for economic recovery will become a reality. Observers are skeptical about the chances of an early agreement. The EU Parliament had already called for an emergency plan in mid-May, should the agreement on the EU budget be delayed.

The EU Commission’s development program is the next step in a chain of relief measures. Previous measures that Brussels has already launched include:

  • Aid from the Euro bailout fund for states amounting to 240 billion euros. Countries in need can use loans of up to two percent of their own economic output. However, the money has to go to health costs to fight the pandemic. Aid has been running since 22 May.
  • Loans of EUR 200 billion in total through the European Investment Bank (EIB) for crisis-shaken companies. The Member States must guarantee EUR 25 billion as collateral. On May 25, the EU countries agreed on the loan program. It should start in early June.
  • The “Sure” loan program, worth EUR 100 billion, is intended to enable European short-time work benefits and also to support the self-employed. The EU Commission wants to borrow money on the financial markets to be able to provide the loans. Member States are to provide collateral for EUR 25 billion. The EU ambassadors agreed on the program in mid-May, but the national parliaments still have to approve the plans.
  • In mid-March, the EU launched the investment initiative: EUR 37 billion from the EU structural funds and the EU budget. 8 billion euros come from undrawn structural funds. The rest comes from co-financing from the EU budget. The funds are intended to support health systems and companies. 8 billion euros of the investment initiative are to act as loans for 100,000 small and medium-sized companies.

  • In March the EU also suspended the debt and deficit rules of the Stability and Growth Pact. This should give companies a free hand in aid packages and economic stimulus measures.

Despite the help, the financial worries of many EU citizens are great. According to a survey commissioned by the European Parliament, almost a third of the 21,000 respondents from 21 EU countries suffer from loss of income. Almost every fourth is in short-time work. Only 42 percent were satisfied with the EU’s measures to date. In view of the Corona crisis, more than two thirds asked for more skills to be given to Brussels.

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