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Wednesday 12 May 2021

Recommended EU: there is still a battle over anti Covid measures

EU: there is still a battle over anti Covid measures

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There is great confusion under the Brussels sky.

Despite the optimism and unity of the facade, the conflicting interests of the individual countries have certainly not been set aside and risk blowing up those agreements on anti Covid strategies that had caused talk of an epochal turning point.

There are two of the most recent signs of deep divisions that are difficult to overcome: the tug-of-war between the European Parliament and the Council which has postponed the approval of the Recovery Fund and Germany's flight forward which, in contrast to the official statements The EU has announced that it will make budget debt until 2024.

But let's go for order.

The European Parliament and the Council are at war over the next multi-year EU budget (2021-2027), a war that at the moment seems to have no way out. And until there is an agreement on this dossier, seven countries have made it known that they will not give the formal green light to the Recovery Fund. Consequently, preventing ratification in national parliaments, which is essential for starting the issuance of community bonds with which to finance the 750 billion euro maxi-plan.

On the one hand, there are Poland and Hungary who do not want to link the disbursement of funds to respect for the rule of law, as MEPs are asking. On the other hand, there are the four so-called frugal (Austria, the Netherlands, Denmark and Sweden), also supported by Finland, who fear they will have to pay more money and risk seeing the rebates canceled, the discounts they enjoy. Result: they did not sign the formal agreement and so the first tranche of aid from the Recovery Fund, scheduled for the second quarter of 2021, would end up being postponed to the second half of next year.

The German ambassador, who represents the EU Council in negotiations with MEPs, has sounded the alarm: «I am extremely worried because the negotiations are proceeding too slowly. Without a quick agreement on the budget, we risk delaying the adoption of the Recovery ».

According to experts, if the deal is not closed by mid-October, the postponement will be inevitable. In fact, without the agreement, the rebel countries will not give the green light necessary to be able to start national ratifications. This process may take several months in some states.

And we come to Germany which announced the abandonment of the totem of a balanced budget until 2024.

The announcement of the suspension was given by the Minister of Finance Olaf Scholz during the press conference for the presentation of the budget maneuver for 2021 and the financial plan until 2024. To the direct question whether it will restore the balanced budget measure, Scholz replied: I think that direct services to our community and to our society must be maintained and developed and not questioned "in a moment of crisis such as that generated by covid-19.

Berlin is preparing to make new debt for 96 billion in 2021 in order to finance further anti-crisis measures. This would be the second highest debt since the Second World War, after that of the 2020 maneuver which raised the public debt by 218 billion.

It would also seem good news for Italy, which would have the German example to invoke greater freedom of action also in the coming years.

But it is by no means certain that this is the case because Italy is not allowed such room for maneuver. This is underlined by a formal letter sent by the Vice President of the EU Commission, Valdis Dombrovskis, and by the EU Commissioner for the Economy, Paolo Gentiloni, to the Minister of Economy Gualtieri.

In the letter, the two EU representatives write: "We suggest keeping our fiscal policy guidelines under regular review. A first opportunity to do this will be by the end of the year, when the Commission will monitor the development of the general government deficit and debt, based on its autumn forecast, and when we will discuss the opinions on the draft budgetary plans of the states. euro area members and euro area recommendations. The Commission will pay particular attention to the quality of the fiscal measures adopted and planned to cushion the impact of the crisis, support recovery and strengthen resilience, while taking into account fiscal sustainability considerations. The assessment will also cover the possible impact of the guarantees provided by the government.
In the spring of 2021, taking into account the updated macroeconomic projections, we will reassess the situation and take stock of the application of the general safeguard clause".

Translated into other words: Italy, due to its high public debt, is specially supervised and has no room for maneuver on public debt other than those approved by the Commission.

As a further demonstration that in the EU, the autonomy of states is not all the same. Virtuous Germany decides how and when it wants, while indebted Italy cannot afford it.

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