EU stimulus funds will finally go and could be a game-changer


Nine months after EU leaders broke new ground by agreeing to a massive stimulus spending program financed by joint borrowing, national capitals are submitting their plans on how to spend their allocation to the European Commission. The bloc’s three largest economies – Germany, France and Italy – all presented their plans ahead of last Friday’s target submission date.

The gestation period may seem long given the severity of the recession, and it will be several more months before the plans are validated and the money begins to flow. But seen through the lens of the need to secure trust between 27 sovereign nations, recovery and resilience plans have arrived at lightning speed.

The process may have already produced results. “You would have hoped [for] investment to get started as quickly as possible, ”said Laurence Boone, chief economist of the OECD, the economic think tank for rich countries. However, the stimulus plan “has enabled countries like Italy and Spain to have a solid investment plan. I’m not sure it would have been possible without [it]”.

Prolonged planning can even accidentally be a good match for the longer-than-expected pandemic recession. “You could say that the process is slow – but because the vaccination took a while [disbursements] Will likely coincide with the reopening of the economy, so now is not a bad time, ”Boone said.

People familiar with the process in Brussels and in national capitals highlight how the challenge of developing multi-year spending and structural reform plans, with clear deliverables in digital and green spaces, has in itself been an innovative exercise for governments – especially when the commission itself has taken a practical preventative approach to ensure that once a government submits a plan, it is unlikely that it cannot be approved.

Europe Express Newsletter

Sign up here to receive Europe Express, your essential guide to what’s going on in Europe, delivered straight to your inbox every day of the week.

“Perception [last year] was that it would be dominated by the board of national leaders, ”said Eulalia Rubio, senior researcher at the Jacques Delors Institute. “Now we realize that the main player is the commission. He played his cards well.

Paradoxically, rather than this massive budget transfer highlighting the cliché contrast between “responsible” creditor nations and “debauched” debtor countries, the countries most affected by the latest crisis are emerging in a rather positive light. Rubio believes that “most of the shots will be of high quality – very good and very ambitious”.

The hard experience of demonstrating their capacity to reform before the markets and the “troika” of creditors ten years ago may now be a good place for the countries of the South. Nor does it seem likely that the “frugal” in the North will let go of the emergency brake on disbursements, which have been included at the request of the Netherlands. An official from a northern member state said keeping an eye out for potential sinners would take too long: “We rely on the commission to pick up anything stupid.”

That’s not to say that such a big and new spending initiative like this carries risks. In a report, Rubio noted that “many governments will generously use emergency procurement processes and relax budget controls” in order to take the money out of the door. She argued that this creates both a necessity but also an opportunity to improve the EU‘s tools to fight fraud and corruption.

It seems inevitable that there will be obstacles in the road between planning and implementation. “A key question is how the milestones” – the concrete deliverables to be included in the final plans – “will be defined,” Rubio said. Again, the commission will play a central role in agreeing on acceptable milestones and assessing whether they have been achieved.

If all goes well, the Next Generation EU package will finance good investments and trigger useful reforms. But just as important as the plans themselves can be the jolt they give to economic governance at both national and European level, before a single cent has been spent.


About Author

Comments are closed.