On the agreement reached in Europe 👇🏽
We all remember the response given by the European institutions to the financial crisis 10 years ago: austerity and demands for social cuts that caused the suffocation of the southern countries and a serious crisis in the European project.
The agreement reached this morning in Europe does not go as far as some of us would like, but it goes in a completely opposite direction to what we saw throughout the last decade.
The agreement approved by the European Council has a historical and unprecedented scope for the EU: all the countries that make up the union will jointly go into debt to finance a fiscal stimulus of a very important dimension.
Europe reacts jointly, in coordination and in solidarity with an ambitious investment plan.
The agreement constitutes a real step forward in the EU budget model, and for the first time in the history of the EU, a package of subsidies financed with joint debt is proposed.
The "eurobonds" that seemed unfeasible a few years ago are now a reality and will serve to face this crisis in a different way, without cuts.
The EU seems to have learned the lessons of the previous crisis: this time we will not have austerity, but an ambitious fiscal stimulus plan; this time instead of letting the situation be run by those that are disconnected from the local reality,
the strategy will be based negotiated investment plans. We have realized that the only way to get out of the crisis is to cooperate.
A mobilization of 750,000 million euros in funding is expected in the 2020-2023 period, destined to the recovery of the region. It will involve a mobilization of resources equivalent to 17% of the Gross National Income of the EU.
• In comparison with the proposal by the European Commission presented at the end of May, the European funds that will be distributed in the form of grants will now be 390,000 million, instead of the 500,000 million initially proposed.
Despite the reduction, it is a very significant amount. These grants correspond to Funds from the Recovery and Resilience Facility and different items from the MFF 2021-2027.
• The remaining 360,000 million will be distributed in the form of loans, which will begin to be repaid from 2027 and will have a repayment period of 30 years, with a low interest rate.
• Spain will receive 140,000 million, of which 72,000 million will be non-refundable aid. This important amount of investments will be crucial to achieve two objectives:
1) to promote the recovery of our economy and 2) to promote the change of our production model, moving towards the ecological transition, digitization, sustainable mobility, and the development of the care economy.
• Access to these funds must be requested through Investment and Reform Plans submitted by each country, thus giving countries flexibility to carry out their national programs, always within the framework of the recommendations of the European Semester (CSRs).
Specifically, programs related to digitization and ecological transition will be positively valued. We are, therefore, in a different scenario than we were in the previous crisis, so we can speak of a "soft conditionality",
as opposed to the "strict conditionality" that we saw in that crisis.
• Regarding Governance, national programs should be approved by a qualified majority of member states, rather than unanimously. Thus, the veto capacity demanded by some countries has been avoided.
• Regarding Governance, national programs should be approved by a qualified majority of member states, rather than unanimously. Thus, the veto capacity demanded by some countries has been avoided.
• However, an emergency brake by which one member state or several may demand the monitoring of a program from another country in the event of deviations from what is negotiated has been established.
This monitoring will have a political and not a technical nature, since it will be the European Council that will decide on the continuity of the program.
• The European Social Fund is also strengthened. Of the budgeted funds, at least 25% should be used for social inclusion and integration of migrants; 2% will go to combat material deprivation, and 10% will go to fighting youth unemployment.
The agreement also avoids the cuts to the Common Agricultural Policy that were initially considered.
• Despite the global and satisfactory nature of the agreement, in recent hours we have seen important items in the Multiannual Financial Framework (MFF) being reduced to compensate countries that required a more moderate investment package.
This is the case of Health spending (initially set at 5,000 million), the “Horizon” item dedicated to research (11,500 million) and the Just Transition Fund (which goes from 30,000 to 10,000 million), at a time when the Public spending on these items has proven essential.
However, we must highlight something key for Spain: the agreement reached will not only allow the coalition government to continue to implement its program,
but will also be a huge stimulus to continue with the key transformations focused on recovery of rights and the reconstruction of the public services highlighted in the current government agreement.
This agreement is a promising step for both the EU and Spain since it provides fuel to the European project, but there is still a way to go in a European Union that guarantees an institutional and governance framework in which democratic procedures are reinforced,
as well as a reform of the Stability and Growth Pact to avoid a possible return of fiscal austerity.
