May 30, 2020

The frugal refuse to mutualise debt in the EU and propose a temporary fund


The Netherlands, Austria, Sweden and Denmark, the group of countries baptized as the frugal, are in favor of the European recovery fund after the coronavirus being temporary, through loans and that does not entail a mutualisation of the debt or an increase in the contributions of the countries to the European coffers.

The initiative of this group of Member States, to which Efe has had access, comes just four days before the European Commission presents its own recovery plan on Wednesday along with the new proposal for the seven-year Community budget, and a week after Germany and France advocated a half-trillion-euro fund in transfers, not loans.

The proposal claims to seek “an efficient and sustainable recovery” after the COVID-19 crisis and suggests that countries that have been affected by the pandemic could request a loan from this fund for a maximum of two years that is “aimed at activities that contribute most to recovery “, such as innovation, research or the green transition.

The document from the Netherlands, Austria, Sweden and Denmark, which defends a “temporary and punctual” fund that is an addition to the aid already approved and to the budget for 2021-2027, does not include a specific figure such as the Franco-German plan, but rather proposes wait for the European Commission to determine first how much money each country needs for financial recovery.

REFUSAL TO SHARE DEBT

In any case, it does insist that the recovery of the European economy should not lead to a mutualisation of the debt or an increase in national contributions to the Community budget, which in the current period (2014-2020) are equivalent to 1.16 % of the Gross National Income of the Member States.

“We cannot accept any instrument or measure that leads to debt mutualization or significant increases in the EU budget. The Commission’s forecast shows that all Member States will experience an unprecedented economic contraction in 2020, with a recovery only partial in 2021 “, emphasize the frugal in the proposal.

These countries want the affected countries to draw up their own recovery plan, “a comprehensive assessment of the needs of the most affected (social) sectors and segments” and points out as “essential” that the most affected Member States commit to reform.

“Supporting recovery must ensure that all member states are better prepared for the next crisis. A strong commitment to reforms and the fiscal framework is essential to promote potential growth,” they stress.

This emergency fund, they point out, should support state efforts to carry out “national reforms and strengthen the single market.”

In addition to future reforms, all four countries suggest that the fund be linked to compliance with European values ​​and the rule of law and that spending be protected from possible fraud.

LOANS AGAINST SUBSIDIES

Unlike the proposal made last Monday by Germany and France, which promotes an economic recovery package of 500,000 million euros that would not have to be repaid, this fund proposed by the frugalists would be by way of loans, and not a “donation” .

The loan, these four countries point out, would be made “under favorable conditions for the benefit of the country that needs it, while limiting the risk to all member states and offering solid incentives”, although he stresses that this fund should “guarantee” that countries are better prepared for the next crisis.

The President of the European Commission (EC), Ursula von der Leyen, has been in favor of the fund being disbursed through a “balance” between loans and transfers, while the European Parliament advocates that it be “majority” through transfers that do not have to be returned.

Countries like Spain are in favor of funds being disbursed through non-refundable subsidies, instead of loans, to prevent credits from raising debt ratios and widening the economic gap on the continent.

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