Rescued
The world in general and Europe in particular have witnessed the biggest economic agreement within the EU since its foundation after arduous months of negotiation and through a long meeting, almost the biggest in its history, held in Brussels between 17 and 21 July to achieve some very ambitious objectives, since the multiannual financial framework was established 30 years ago and resources for cohesion were doubled.
On this occasion, the 27 partners of the Union, unanimously and for the first time without the participation of the United Kingdom, had to reach a double agreement: to establish a revival fund to largely alleviate the economic damage caused by the pandemic caused by the COVID-19 , mainly in those countries most affected, endowed with 750. 390 billion for non-reimbursable but investment-oriented expenditure and 360 billion in low-interest loans, 70% of which will be disbursable between 2021 and 2022. Of this entire pie, Spain will receive some 140 billion, of which 72.7 billion will be non-refundable aid. And, at the same time, they had to define and approve the Union's Multiannual Financial Framework (the budgets) for the period 2021-2027, which amounts to 1,074 billion euros, which in this case and as usual, will be provided by the Member States themselves according to a series of parameters and particular needs. This means that the entire package adopted on this occasion amounts to EUR 1.82 billion, the largest ever.
In order to obtain the additional EUR 750 billion, for the first time and on an extraordinary basis, the Commission has had to be authorised to borrow this figure, using the market with certain limitations, such as the fact that the amounts requested will have a maximum application period set at the end of 2026 and that the programme's reimbursement will not be extended beyond 31 December 2058. Also, that the amounts owed by the Union in any given year for the reimbursement of the principal capital should not exceed 7.5% of the maximum amount of 390 billion euros for expenditure.
One of the innovations in this financial mechanism is that the agreement also includes mechanisms to strengthen the European Commission's capacities to collect its own extraordinary income in order to be able to repay this impressive extraordinary credit without affecting the budget itself.
These mechanisms will be based, among others, on: a new tax on coal and surplus plastic waste, which will be applied to countries that acquire them or are polluting, others aimed at the activities of large companies in the digital market (the so-called Google tax), a revised Emissions Trading System (ETS) and others derived from financial transfers (FTT, the famous Tobin tax). However, in terms of detail, the document provides only a general timeline for several of the tax proposals. In addition to the revised ETS and the FTT, the other three proposals are expected to be released in early 2021. The carbon cap and digital levy adjustment is not expected to be implemented until 2023.
The lack of real detail on the various fiscal proposals and the possible need for revenue sources to address how to finance the new EU debt, suggest that much work remains to be done and to be defined by policy makers in Brussels. At the moment, it is not clear what the repercussions and implications of this new and additional tax shock will be for the rest of the taxes already used and collected in the EU and the real capacity of these new sources of financing to fully pay the new common debt guaranteed by the EU.
Therefore, it is not known whether these initiatives will be sufficient to cover the repayment of what has been requested and the costs of its interest, but from the outset, the document agreed upon marks certain limits to the capacity or intention of the Member States to collect these taxes when the Union assumes the amount and the collection of said taxes, thus annulling the aspirations of many of these, among which Spain and its new tax policy are undoubtedly included. However, it also warns that if such measures alone do not generate the necessary liquidity, the Commission could provisionally request more resources from the Member States as a last resort.
The total amount of 750 billion euros is distributed as follows: 672.5 billion to the Recovery and Resilience Fund (RRF), of which 360 billion in loans are provided directly and 312.5 billion is allocated to cover programmes submitted by nations and approved by the Commission (provided no one vetoes them). A reaction fund called React EU with 47.5 billion. The Horizon Europe fund with 5 billion. A profit fund called Invest EU with 5.6 billion. Another for Rural Development with a sum of only 7.5 billion. A fund called Just Transition Fund (JTF) with 10,000 million and finally, a smaller fund called Rescue with 1,900 million.
Seventy percent of RRF grants will be committed in 2021 and 202, and the remaining 30% will be fully committed by the end of 2023. As a rule, the maximum volume of loans for each Member State will not exceed 6.8% of its Gross National Income (GNI).
In order to be able to implement the remittances in the plan, Member States will send in advance their national plans for recovery and resilience. These plans shall set out the reform and investment agenda of the state concerned for the years 2021-23. These will be reviewed and adapted as necessary in 2022 to take account of the final allocation of funds by 2023.
To avoid continuing with the old system of "recommendations" when a state deviated from the path set out; something which is totally ineffective because it is not binding and through which the Member States, year after year, resisted their compliance without suffering any reprisals; at the behest of the so-called Frugals (Netherlands, Austria, Sweden and Denmark) a complex system has been introduced which is known as the "Emergency Brake" which will embrace those pauses which, like Spain, almost never complied with such recommendations.
The Commission is required to evaluate the recovery and resilience plans received within two months of their submission. The same will apply to the criteria for consistency and the country-specific recommendations, and whether they are all aimed at strengthening the growth potential, job creation and economic and social resilience of the Member State; for them to be approved, a very high score will be required in such an assessment.
The effective contribution to the green and digital transition will also be a prerequisite for a positive assessment. The assessment of the recovery and resilience plans will be sanctioned by the Council, on a proposal from the Commission, by a qualified majority, through a process which the Council will endeavour to complete within a period not exceeding 4 weeks after receipt of the proposals.
A positive evaluation of payment requests shall be subject to satisfactory compliance with the relevant milestones and objectives. To this end, the Commission shall request the opinion of the Economic and Financial Committee on the satisfactory achievement of these milestones and objectives. This Committee shall endeavour to seek and reach consensus. However, if, exceptionally, one or more Member States consider that there are serious deviations from the satisfactory achievement of the abovementioned milestones and objectives, they may request the President of the European Council to refer their concerns to the European Council for discussion at its next meeting.
In the event that the matter has been referred to the European Council for consideration; pending its resolution, the Commission may not take any decision on the satisfactory fulfilment of the requirements or the approval of payments or transfers to the State concerned until the next European Council has discussed the matter in detail. This process should normally be completed within three months of the Commission's request to the Economic and Financial Committee for an opinion.
Getting to this point was not by chance; it required a very long and tedious process that lasted several months. The European Parliament started work on providing extraordinary funds to combat pandemics and recover lost capacities (initially estimated at around 50 billion euros) in April 2020. In view of the complicated situation and the growing number of requests and needs it finally approved on 15th May by a majority to mobilise up to 2 billion euros.
The Commission's work was unable to achieve majority agreement on the form and amount of the activation of what was then known as the Reconstruction Fund to which it estimated a maximum of 1.5 billion and which was to be given to the most needy States with hardly any conditions. The obstacles to reaching a consensus text came from the very first moment from the well-known frugal countries, which were not willing to give up such an amount of money without demanding certain types of serious conditions, reforms or interests.
As a result of the nonsense, the deadlock created and the apparent ineffectiveness of the European Commission, on 18 May, Merkel and Macron presented a joint initiative on this reconstruction fund. This proposal limited aid to 500 billion euros for the countries most affected by the economic crisis caused by the pandemic. The plan was based on four pillars: health strategy, reconstruction fund for solidarity and growth, acceleration of the ecological and digital transition and the strengthening of European industrial capacity and sovereignty.
Following this initiative, on 27 May last, a second major proposal appeared from the President of the Commission, which was finally brought to the table of the Council for final discussion, which, although based on the previous initiative, differed in some points from it and was close to the 750 billion euros to be mobilised. Its plan was integrated into the legal framework of the so-called "European Semester" which includes those already determined and others to be determined, controls and specific recommendations, as well as a certain focus that the investments must comply with. Of the total amount, 310 billion would be dedicated to direct subsidies for projects approved by the Commission and 250 billion would take the form of credits. In addition, 55 billion would be added to existing cohesion policy programmes, 40 billion to the Fair Energy Transition Fund and another 15 billion to the Rural Development Fund.
After four days of long and hard discussions, which were very tense at various times, about to be blown up at the height of their powers - including a very hard one between President Sánchez and his Finnish counterpart, which almost extended the group of frugals by one more - and some major threats of abandonment, things got back on track. The EU in this Summit has shown several faces or aspects in the sense of coexistence, the common good and testing its survival, but also the great differences between the North and the South, between the saving and compliant countries and those that are not at all; the mutual and growing distrust between the partners and that in the long run, it has been possible to verify that all of them have given up their aspirations in exchange for certain benefits, which have generally been transformed into profits from the special fund for recovery or, if necessary, into savings in their contributions to the common budget (important reductions in the annual contributions to the budget by frugals). In reality, and as always, it must be said that solidarity does not prevail, but the vile metal.
Merkel, in spite of the fact that her star is losing its light, continues to shine with the greatest splendor of all those present; although she is already tired of so many internal and external avatars and is soon retiring from public life, she has flown to make clear her capacity and political legacy, her patience in negotiation processes and above all, her leadership without any discussion. The fruits of this Summit and its Agreements would not have taken place without it. Thanks to your good work, for the first time in the history of the EU, the club, and without the participation of the United Kingdom, will get into a great deal of debt in order to finance a necessary and very important extraordinary economic recovery in somewhat more favourable conditions than those that preceded it.
After the long explanation and clarification of these facts, unprecedented in the EU itself given the amounts mobilized in unison, the total and partial amount of each one of them, the novel form of their financing and because of the complex solutions adopted for the control of expenses and their application channeled to specific ends, it must be said that this is not a Marshall Plan as many have quickly begun to describe it, because unlike that American program after World War II, the capital is not foreign or administered by them; it is a plan of its own and it comes from a great debt contracted by all and which EVERYONE, in one way or another, will have to pay in the end. It is simply a full-scale RESCUE, whose rules, apparently, will be as strict as those imposed on us after the 2008 crisis, but they will mark a series of paths and milestones to be fulfilled and that it will no longer be left to the discretion of the Commission to judge or recommend the acts and steps taken or to be taken. Now, any Member State can complicate the future and the plans of another according to the form and the way of acting.
As far as Spain is concerned, to be left in the international arena as the second country with the greatest economic problems in the EU, after having been one of the worst in the world in forecasting and managing the most serious pandemic in recent times, is not a good business card, it leaves us in a very bad position and it is neither fair nor appropriate, and even less reason to be cheerful or to come here happy and be received with great and imposed applause - which, although one might think that the first ones were spontaneous', The latter made it very clear how mendacious and procacious a government can be when it faces a recovery that is directed and protected by means of a huge rescue, which will be aggravated by the cuts that, as we will see, directly affect Spain in the Union's budgets (fundamentally in health, to the rural world and to the developing regions) and of which few or almost nobody speaks nor wants to do so because of the chapters that have been reduced, which many have stopped paying and because our greater contributions to the common fund of the club, in exchange, will leave well diminished the amount of all the aid that can arrive to us from that part.
Our president, in order not to change or lose the habit, left a very bad image no matter how much he and his many palmeros want to hide it; he attended, as a stone guest, to few meetings limited to a few where decisions of substance were taken and he left in the hands of the others the defense of the interests and needs of Spain. He played the trick that the others will worry about saving us to avoid that with our fall a bigger and deeper hole is not made, that is the end of the Union; he arrived without proposals (no one knows) or papers in his hand; he appears in almost all the pictures cornered at the end or reading behind the papers of the others, he only spoke at a dinner to create a serious problem with Finland, that Merkel had to fix and he kept a pathetic silence, that he himself took charge of defining as his peculiar way of empathizing with the others. Pathetic, to say the least.
As a final summary, it can be said that never has there been so much change in so little time within the EU; this Summit, which was born out of the need to cover up the deficiencies observed in health care appearance and capabilities in order to be able to combat pandemics like the present one more successfully, has ended up mobilising many millions and other kinds of resources, but has definitely forgotten its origins and needs. I do not believe that with the changes and improvements in digitisation, movements in support of avoiding climate change and a series of other aspects relating to employment and training we will be able to face up to such a pandemic again. In the end, the interests of the strongest will lead others to make an effort on behalf of everyone, and we already know where the greatest benefits will come from. It seems that everyone was so happy, although some, much more so.