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The coronavirus pandemic and the question of how to respond to it has raised profound questions in the EU about what its member states want the union to be.
This week national leaders met over video conference for the fourth summit since the coronavirus pandemic broke out, as they grappled with the deep differences of belief and principle between states that the crisis has exposed.
A day before the summit was held, officials began playing down what would be achieved. No joint statement by the national leaders would be put out (a nightmare to thrash out over video, they said). Besides, the matters at hand were complex, and one meeting was not going to solve them.
The leaders were bought the luxury of more time by a European Central Bank intervention in the form of actions to keep down the cost of borrowing for weaker economies and to support struggling banks.
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Ultimately, they indicated their assent for a package of measures that had already been agreed by their finance ministers. On the most contentious issue, of a recovery fund to counter a deep economic slump due to the pandemic and how to pay for it, profound questions remain.
In recent weeks a group of states led by Italy had pushed an ambitious aim: eurobonds. This issuance of shared debt has long been a hope of those who believe it would even out the economic imbalances of the euro zone. In this instance it was promoted as a way to come to the rescue of the weaker economies of Europe worst hit by the pandemic.
The push failed. But its supporters hung their hopes on two sentences in the speech of European Council president Charles Michel following the summit.
“We also agreed to work towards establishing a recovery fund, which is needed and urgent,” Michel said. “This fund shall be of a sufficient magnitude, targeted towards the sectors and geographical parts of Europe most affected, and be dedicated to dealing with this unprecedented crisis.”
Tied to budget
Michel's remarks signalled two steps forward: that this recovery fund would go to the technical experts of the European Commission to be thrashed out in detail, and that it would be tied to the seven-year EU budget.
This is convenient for the commission, which had been calling for a higher EU budget even before the pandemic hit.
Money for the budget is raised from member states through contributions, and is then parcelled back out in grants according to joint priorities of the bloc. The commission can increase its firepower by using some contributions as collateral for borrowing, which it can lend out to member states at low interest rates in times of pressing need.
The commission has said it will lay out its plan for consideration next month. But the wrangling is likely to last much longer
This makes it likely that any recovery fund will be primarily in the form of loans rather than grants, contrary to the hopes of countries such as Spain, which have said direct infusions of cash are the best way to help struggling countries that already have more than enough debt.
The commission has said it will lay out its plan for consideration next month. But the wrangling is likely to last much longer. The move has combined the division over the recovery fund with the existing standoff over the EU budget, between states that want a cheaper EU and those that want to increase funding. And a minefield of differences will lurk in the detail.