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Wednesday 12 May 2021

Recommended Will Recovery Fund change the EU economy after Covid?

Will Recovery Fund change the EU economy after Covid?

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But is the Recovery Fund really a historic agreement that will change the economy of the 27 EU countries after the Covid crisis? If we were to rely on the comments of the press and on the statements of the top European leaders, we would say yes, but the indisputable reality of the numbers at a world level belies this thesis.

Nobody in Europe wanted to compare the commitment of 750 billion euros of the Next Generation Eu (the new name of the Recovery Fund) with what the other great countries of the world have done and it does not seem a coincidence: in times of donation and in power fiery comparisons are merciless against the Community agreement.

A few weeks ago an in-depth report by the International Monetary Fund on the responses given by governments around the world to the pandemic crisis, which shows that in just four months (between March and June) the G20 countries have fielded a total of 9 trillion dollars in support of their economies.

Of course, the G20 includes the richest countries in terms of GDP on the planet, but even if we compare the investment promised by the EU with that of its most direct opponents, the EU agreement is greatly reduced, especially if we consider the size of the investments per capita.

The first country in the world are obviously the United States which are still above the EU in terms of GDP (20.500 billion dollars, 2019 IMF data) and have 328 million inhabitants: the American government has allocated even before June 2.300 billion dollars, a figure equal to about 11% of GDP and which will all be introduced into the economy in the current year.

THEEuropean Union, which in terms of overall GDP is second behind the USA (18.495 billion dollars in 2019) but which has almost 450 million inhabitants (446,8 million after Brexit), has allocated about two thirds less and for an arc of much longer time, given that, according to forecasts, the first European money will reach the member states towards the end of 2021.

Leaving aside the China, third in the ranking with 13.092 billion dollars of GDP, whose data are not very reliable (however, there is talk of an investment equal to 4,1% of GDP), to amaze are the data of the Japan, third country in the world and fourth in this ranking with an annual GDP of almost 5 trillion dollars. Japan, which has 126,5 million inhabitants, has invested a huge amount against Covid, equal to 21% of its GDP and corresponding to about 1300 billion dollars.

The effort of the Canada which has invested around 15% of the annual GDP, that is 317 billion Canadian dollars for a decidedly modest population, equal to 37,7 million inhabitants.

 Equally large, in relation to its population of 25 million people, is the investment ofAustralia whose government earmarked $ 164 billion to support the post-Covid economy, accounting for approximately 8,6% of its annual gross domestic product.

even the Brazil, which has also been experiencing an economic crisis for several years, has spared no effort and the Monetary Fund underlines that it has invested a figure which corresponds to 11,8% of its GDP.

In other words, all the largest countries in the world have done more and immediately, although it should be remembered that, in addition to the funds from the Recovery Fund, each European country has intervened to support its economies with direct and immediate investments.

La Germany, with a GDP of 4.029 billion dollars and fourth country for GDP in the world, has invested in two stages a considerable amount: first 156 billion euros and then, in June, another 130 billion, thus reaching almost 8% of the GDP.

La France up to now it has allocated around 110 billion euros, about 5% of the GDP, approving two maxi maneuvers by June.

More diluted, however, was the intervention of theItaly which started with the 25 billion euros of Cura Italia to which the 55 billion of the Relaunch law were added in May, with an overall incidence of 4,6% on GDP, an incidence destined to reach approximately 6% of GDP with Parliament's approval of the new budget gap of € 25 billion.

It should be stressed, however, that the intervention of the Recovery Fund, which should complement national efforts, will be put into effect on the next EU multi-annual budget and that the Member States must, before receiving the funds, pay their shares in Brussels . Even in the event of a lower contribution to the funds that will then be assigned, as should be the case for Italy, the EU countries will first have to pay their national resources to then be able to take advantage of the funds and only if their plans receive the yes from the 'European Union.

In short, a game that many define as almost zero sum, associated with a long and cumbersome path, when the rest of the globalized world immediately runs and invests significantly more significant figures than the Old Continent.

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