A new deal for Europe

As the EU’s sleigh delivers the largest aid packages ever, heads of state are this Christmas’ winners

Our last article explained how a recovery plan was necessary and the measures that would likely take place for it to happen. Now that the deal has been reached between the twenty-seven heads of States and voted in the European Parliament, we may dive a bit deeper into it to analyse its characteristics and conditions.

This deal is ground-breaking: the EU will distribute a total of €750 million to European countries, mostly through facilitated loans (€360 millions) and direct subventions (€312.5 millions). Through this deal, the European Union has seized the opportunity to unite and to create a common fate in an era in which sovereignty threatens it more than ever. Indeed, more than a mere financial interdependency, this “New Generation EU” deal will be conditioned to specific requirements regarding the money’s use which should shape the future of the Member-States

Among those conditions, ecology appears to be at the centre of attention. In the hope to reach carbon neutrality in the EU by 2050, 30% of the funds provided to the Member-States must be used towards the ecological transition (renewable energies, recycling, subventions to ecological start-ups). Similarly, though in a lower measure, this deal also aims at guiding the continent through the digital revolution, namely the transition to 5G. Finally, under the influence of French President Emmanuel Macron, this deal should be conditioned to a compliance with European values commending liberal democracy and the rule of law. In other words, the EU will likely inspect whether its Member-States respect their citizens’ human and political rights. If not, it is likely that such countries will not beneficiate from such aids.

Although it is never clearly stated, those measures especially target Poland and Hungary, the black sheeps of Europe. It has been a few years since these two countries in particular have been in the EU’s line of fire for many failures to comply with the rule of law with EU law, particularly regarding women’s and homosexual’s rights. Hence, this recovery deal appears like an excellent way to get these deviating members back in line, if they ever want their respective 37.7 and 8.7 billion euros. To sum up, every one of the 27 Member-States will have to come up with a plan and present it to the European Commission. Once validated, these plans tracing all the expenses engaged with EU’s money will have to be approved by a qualified majority in the European Council.

All this is for Head of the European Council Charles Michel a decisive moment: a deal for a new Europe. Many times, he emphasizes the ground-breaking nature of the deal: “This is a first time for Europe in many regards. […], he says, The first time the European Union will borrow to invest and to reform; […]; The first time a major part of the EU budget is linked to our climate ambitions; And the first time our budget will be linked to the rule of law”. Charles Michel also likes to think of this deal as a way to further unite Europe as “of course, it is a lot more than money”. This recovery plan is also meant to send a message to the international community, “The signal we have sent is a signal of confidence”, he writes. It was said that this deals aims at developing a strategically autonomous Europe. A Union which would be stronger, fairer, more resilient and more independent from the rest of the world. For instance, the European Union could impose a carbon border adjustment: “If foreign companies want access to our market, we expect them to be on the same footing as our European companies. We are sending a message not only to our citizens, but also to the rest of the world: Europe is a world power.”

Before such great hopes and expectations, Member-States got to work in order to find proper plans which would please the European Commission and Council. In the Union, the decision seems to lean towards targeting the offer and the investment as they were the most hurt during the early stages of the pandemic. As uncertainty grow and confidence dropped, private investment went down and so did the markets. According to the Observatory of the European Saving (OES), stocks fell by 27% on the first trimester and the amounts of stocks detained by households fell by 21.7% regarding the last trimester of 2019.

Likewise, European citizens saw their hedge funds-managed portfolio fall by an average of 3.5% with respect to the last semester. However, fiduciary and first-hand bank account rose by an average of 8% with respect to last year, meaning that the demand is very dynamic. Naturally, as lockdowns eased or ended, people were able to consume vigorously again, diminishing the damages. All these factors explain the decision to focus on production, especially within sustainable development and digital sectors.

France was one of the early countries to submit its recovery project, hence a look at it gives us an insight of what may be the New EU. Among other things, on the ecological dimension, France plans to renovate old buildings to reduce the use of energy; to decarbonate the industry (decarbonisation de l’industrie) or to develop green hydrogen. On the competitivity side, it plans to lower production taxes, which should, as stated above, boost the offer in the country; re-localise the production on the national territory to favour employment and to invest in the future tech (technologies d’avenir).

Similarly, the Spanish government said it was to invest 15 billions out of 140 to develop 5G networks and internet coverage in the country. By 2025, Prime Minister Sanchez wishes to invest a total of 140 billion in the sole digital sector. It is likely that many other countries will adopt very similar measures for their recovery.

Image credits: Yann Schreiber/Agence France-Presse — Getty Images


Ouest France, “Plan de relance européen. L’Espagne utilisera 15 milliards d’euros pour la transition numérique”, 23/07/2020, https://www.ouest-france.fr/europe/espagne/plan-de-relance-europeen-l-espagne-utilisera-15-milliards-d-euros-pour-la-transition-numerique-6916272

Le Bulletin Quotidien, “Le plan de relance, qui sera dévoilé le 3 septembre, sera fondé sur “un soutien assumé à l’offre et à l’investissement productif”, affirme le Premier ministre Jean CASTEX”, 27/08/2020

Communiqué de presse du 31/08/2020, OEE

“Remarks by President Charles Michel after the Special European Council, 17-21 July 2020”, Charles Michel, 21/07/2020, https://www.consilium.europa.eu/en/press/press-releases/2020/07/21/remarks-by-president-charles-michel-after-the-special-european-council-17-21-july-2020/

Charles Michel, Discours du 08/09/2020 au forum économique de Bruxelles https://www.consilium.europa.eu/fr/press/press-releases/2020/09/08/recovery-plan-powering-europe-s-strategic-autonomy-speech-by-president-charles-michel-at-the-brussels-economic-forum/W

Leave a Reply

Your email address will not be published.



Recent Posts

[wpgmza id="1"]
[contact-form-7 id="4" title="Contact form 1"]