A historical day for EU: Agreement on the economic reconstruction of Europe

A rain of billions the EU countries had never seen. The cause is the biggest economic crisis since the Great Depression. The European Council, which brings together the heads of state and government of the 27 Member States, has approved the 750 billion Next Generation EU – the “Recovery Fund” as the Commission has renamed it – and the next EU multi-annual budget 2021-2027 from 1.074 billion.
Italy is the state that will receive the most funds, around 208.8 billion of which 81.4 million in transfers (only 400 million less than the Commission’s proposal) and 127.4 in loans (compared to 90.9). Prime Minister Conte celebrated the Brussels agreement with great satisfaction: “The resources will come from Europe to restart Italy.

Going even more in detail, Italy will have about 63.5 billion grants and 127.4 billion loans available – at a very low and long-term rate – to make reforms and to transform the country’s economy according to its priorities and the EU recommendations.

In order to be able to access EU funds, Member States will have to submit to the Commission from October a national recovery and resilience plan which will explain in detail how the country intends to use the funds. It will be the Council, on the recommendation of the Commission which has two months, to decide by qualified majority (55% of the countries equal to 65% of the EU population) whether to approve the plan.

The plans must take into account the EU Recommendations for each country published in recent years and aim at strengthening potential growth, job creation and the state’s economic and social reaction (resilience). They must also contain measures that facilitate the green and digital transition of the economy. The money will be paid out only when measurable objectives agreed in advance in the plan are achieved. The assessment of compliance with the roadmaps will be entrusted to the Economic and Financial Committee, the Sherpas of the finance ministers. If, exceptionally, some countries believe that there are problems here, they may ask that the matter end on the European Council table (“emergency brake”) before any decision is taken. The whole procedure is under the competence of the Commission.

The Recovery Fund remained of the overall value of the original Commission proposal, that is 750 billion but the division between subsidy and loans in favor of the latter has changed: transfers will be 390 billion (from 500) and loans 360 billion (from 250).

The money is already available, just ask for it, while the money from the Recovery Fund will arrive from next year and are tied to a project “conditionality”, that is, to well-defined and structured plans. Once the plan is presented, the green light should arrive in two months. The Recovery Fund is financed by the EU Commission which can only go to collect money on the markets from January by issuing bonds guaranteed by the EU budget 2021-2027. To enter into force, the new EU budget must first be approved by the European Parliament and ratification by national parliaments is also needed.

Member States cannot use EU funds to do what they want but must use them to carry out reforms in line with the Union’s priorities. For Italy it means fostering the green and digital transformation of the economy, but also making reforms that Brussels has been asking for for years such as that of justice and the public administration, completing that of pensions, strengthening the public health system, increasing protection for workers, especially atypical ones, to ensure greater liquidity for businesses, to keep public finances under control.

In addition to the reduction in grants, the group of frugal countries – which for days opposed a too unbalanced agreement on non-repayable aid – is also ripping up an increase in rebates, or discounts on contributions to the European budget. from which they already benefit. And so Denmark received 322 million annual repayments (compared to 222 million in Saturday’s proposal), to the Netherlands 1,921 billion (from 1.576 billion); to Austria 565 million (from 287), and Sweden 1.069 billion (from 823 million).

By Domenico Greco

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