Transfers, loans and conditions. “The EU never gives money without conditions,” recalls one diplomatic source, “even cohesion funds have conditions: what are they used for.” And then there is the stigma, the shadow of the 2008 crisis and how community institutions responded: first, late; and, later, linking aid to the countries that suffered the most with great economic sacrifices, cuts in pensions, in labor rights, in social services.
The 2020 European Union is not the 2008-2015 European Union. But the shadow of the EU from 2008-2015 is long, and so is the entire architecture of economic governance, which is still in force – although it has been temporarily suspended by the coronavirus crisis.
But the crisis is not the same either: that financial crisis led to blaming the economic structures of some countries, and it seemed that the recipes to get out of it had that connotation. The current one is the result of a health pandemic, in which a country like Spain, which closed 2019 with 2% GDP growth, well above the European average, can close 2020 with a 9.4% drop in GDP %, well above – but in the opposite direction – of the European average.
The European Union, on this occasion, is finalizing three plans, based on loans, to start operating on June 1, this Monday, two and a half months after the WHO declared the coronavirus pandemic.
This first phase of aid has three legs: the 200,000 million in guarantees from the European Investment Bank for companies; the 100,000 from the SURE program to finance ERTE; and the 240,000 million of the Health MEDE –The converted EU rescue fund.
In total there are 540,000 million to distribute among the 27 to face the economic disaster. Spain, for example, has already announced that it wants to receive aid from SURE. The Government has put at just under 18,000 million what is going to be spent on ERTE, and initial calculations set at around 15,000 million what Spain could receive from SURE, which would give it almost to finance this item with European money, if Well, we still have to know exactly at what price that money would be loaned and how the last figure that would correspond to Spain is.
However, the Government has already said that it is not in a hurry to resort to the health ESM, and that according to the president of the institution, Klaus Regling, Spain, who would have access to around 25,000 million euros, could save 2,000 million in ten years in financial costs.
And because? Because of the stigma. It is money that only has one condition: that it be used for “direct or indirect pandemic expenses” and whose MoU –memorial of understanding– is an equal template for all countries. But, for now, only Cyprus has asked for it. Why? Because the money comes from the ESM, the bailout fund, and nobody has forgotten what happened to Greece, Portugal or Spain: the men in black embedded in the ministries, the loss of sovereignty, the layoffs of teachers and officials; cuts in pensions, the Diktat of the troika.
And then there is the second part, still pending negotiation: the plan to get out of the abyss, the recovery fund, whose proposal the European Commission has presented this Wednesday: 750,000 million from the Next Generation EU borrowed from the financial markets by the Community Executive , of which 500,000 million would be transfers and 250,000, loans. And the bulk of that money is intended to “support member states with investments and reforms to deal with the crisis.”
Reforms? “Reforms and resilience”. What reforms? This is what the European Commission says about the new Recovery and Resilience Mechanism of 560,000 million, the bulk of the plans linked to reconstruction: “It will offer financial support for investments and reforms, particularly related to ecological and digital transitions and the resilience of national economies, linking them to EU priorities. This mechanism will be integrated into the European Semester. It will be endowed with a grant mechanism of up to 310 billion euros and will be able to provide up to 250 billion euros in loans. Support will be available to all Member States but will focus on those most affected, and where resilience needs are greatest. ” According to the first calculations, Spain could access 140,000 million; 77,000 in transfers and 63,000 in loans.
And what does it mean to be integrated into the European Semester? That it is a tool directly subject to the economic governance of the EU, the one that sets fiscal targets, the one that denounces the imbalances in deficit and debt – with ceilings in the 3% deficit and 60% of debt in relation to GDP – the one that in the last decade has asked for up to 300 times cuts in social or social rights, according to the report Discipline and punish: End of the road for the EU’s Stability and Growth Pact ?, prepared by Emma Clancy, researcher of MEP Martin Schirdewan (Die Linke), co-chair of the group of the European United Left (GUE)
“Along with demands to reduce public spending, the European Commission has specifically targeted pensions, healthcare provision, wage growth, job security and unemployment benefits,” says Clancy.
It is true that with the new European Commission, the European Semester in its spring recommendations by countries has assumed for the first time the indicators related to the 2030 agenda. That is, pointing out the shortcomings in social services, which have a lot to do with the recipes decreed in the last decade.
But what Brussels is warning is also true. “Once the recovery returns, the sustainability of the debt must return and the medium-term budgetary objectives will have to be returned,” said the economic vice president, Valdis Dombrovskis, who has not specified a date for it. How long will the escape clause that allows debt and deficit be maintained? “The condition is clear: a serious economic crisis in the EU or the eurozone as a whole. This is the criterion on which we will also rely to deactivate it. At the moment we cannot set a specific date because we have a high level of economic uncertainty “Dombrovskis has said.
In other words, the requirements of the Stability and Growth Pact and the European Semester, which set a maximum deficit of 3% and 60% of public debt, will return as soon as the coronavirus crisis passes.
And the fact that the bulk of the recovery aid is inserted in the European Semester also seeks that: that they do not deviate from the margins of the EU or from that appellation to resilience – to collect when they are badly given – that It becomes the motto of the countries of the north against what they consider cicadas from the south. But not only in what has to do with fiscal limits, but also with what the EU has set as strategic objectives: the ecological and digital transition.
But it is only a proposal, as much as it is supported by the main groups of the Eurochamber, the countries of the south, the president of the ECB and, presumably, has the approval of the Franco-German axis and puts in a position of frank minority to Holland and its allies.
And, as such a proposal, it will be debated at the next meeting of EU leaders on June 19, which will be “hard”, in the words of German Chancellor Angela Merkel, because it requires unanimity and will surely not be resolved in a only day because, in addition, it is linked to the EU budget for the years 2021-2027, which is another 1.1 billion euros contributed by the 27.
Transfers, loans and reforms are the elements that make up the European response to the coronavirus crisis. What remains to be defined is what the reforms will entail, how much the EU will look at itself in its mirror of the past or if it will really bet on a new paradigm. At the moment, there is no talk of troika, or men in black. But institutional economists are experienced in the use of euphemisms, and just as the cuts were called austerity; time will fill the significant “reforms and resilience” with meaning.