EU-landene kunne i går ikke enes med Polen og Ungarn, som spænder ben for den milliardstore hjælpefond på 750 milliarder euro. ING påpeger, at det kan være et problem, at EU-kommissionen har kædet tre økonomiske aftaler sammen i én pakke, herunder med budgettet. Derfor tror ING, at hjælpefonden bliver trukket ud af pakken, og at den skal stemmes igennem af en gruppe af “villige lande”, dvs. uden at kunne rammes af et veto. Det kan være et skridt hen imod flertalsafstemninger om de afgørende spørgsmål i EU.
EU: Recovery fund in jeopardy?
Talks about the multi-annual budget for the EU, including the historic recovery fund, are going down to the wire, putting the recovery potential for the eurozone periphery at risk.
Fierce recovery fund negotiations get an encore
The EU’s agreement on a Recovery and Resilience Fund (RFF) to fight the economic consequences of the Covid crisis can be seen as one of the most historic feats of the bloc in recent decades.
It is not so much the size and imminent economic impact that is so consequential but rather the symbolism for European solidarity. However, the implementation of the fund has turned out to be more difficult than many market participants thought when it was first agreed in July.
First of all, European finance ministers have still not agreed on the technical details of the fund and are running out of time to get everything done before the end of the year. Secondly, the decision to combine the multi-annual budget framework with the rule of law mechanism and the Recovery Fund is a complication that is causing delay.
The decision by Poland and Hungary to veto the package deal this week shows how difficult it is to get a final deal done. Yesterday, Slovenia backed their criticisms of the EU plan.
The three countries are trying to block the currently negotiated rule of law mechanism, holding the entire package hostage and, with hindsight, illustrating that the decision to combine all three deals into one package may not have been the wisest one.
At the current juncture, we refrain from taking a clear position on how these negotiations will end. It is a game of chicken as Poland and Hungary benefit significantly from the EU budget but they also know that other countries would benefit significantly from the Recovery Fund.
Also, by blocking the package deal, net contributors will not get their recently negotiated “rebate” on contributions to the budget.
While normally these deadlocks often end with a last minute compromise, it is also possible that the package will be opened and that the Recovery Fund will be taken out, and that a smaller group of eurozone countries (the so-called enhanced cooperation option) will try to find alternative solutions.
Hjælpepakken er afgørende for at give de hårdest corona-ramte lande et boost. Nedenstående graf viser effekten i procent på de enkelte lande.
A substantial boost to the Covid crisis recovery is at stake
Source: European Commission, ING Research calculations
For a country like Spain, the absence of EU recovery funds would shave off more than half from our current growth projections for ’21 and ‘22, which is a very conservative estimate as we don’t take multipliers into account. Greek growth depends to a large extent on RRF contributions for the coming years as it stands to gain more than 3% per year. For Italy, the impact would of course be smaller, but still substantial.
This means that the downward risk of no agreement on a budget plays into the economic outlook for the coming year. While in the summer, the decision on the Recovery Fund almost looked like it was coming too late, the second wave of Covid has made the grants a very welcome tool to help kickstart the recovery in 2021.