Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Europe’s coronavirus rescue fund is dead on arrival

Europe’s coronavirus rescue fund is dead on arrival

Just imagine what would happen if real money was at stake. Over the last four days, the leaders of the European Union have been furiously haggling over their Coronavirus Rescue Fund. France’s President Macron has been banging the table angrily, the Dutch have taken on the role vacated by the British of the ‘bad Europeans’, and the Germans have been cautiously digging into their wallets to pay for the whole thing. In the end, however, they came up with a deal.
Arch-federalists will hail this as a ‘Hamilton Moment’ – a decisive step towards a more united Europe where the richer states help rescue the poorer, distributing money around the continent in a moment of ‘solidarity’. And while there is an element of truth in that – the EU will, for the first time, borrow money itself – no one should fall for the hype. In truth, the Recovery Fund is likely to be dead on arrival. Here’s why:

First, it is too small. The EU likes to spin big numbers, but the headline €1.5 trillion (£1.62 trillion) includes its normal spending for the next seven years. And the loans hardly count. After all, Italy or Greece can borrow money themselves if they need to. The only significant number is the ‘grants’, which the so-called ‘frugal four’ scaled back from €500bn to €390bn (£450bn to £350bn). Out of a total EU GDP of €15 trillion (£13.5 trillion) that is not exactly chickenfeed, but neither is it a game-changer. On top of that, the ‘rebates’ offered by the frugal four mean it will be even less in real terms, because they will claw some of that money back. In macro terms, it is not going to make much difference.

Next, it has hardly been an amicable agreement. The money has been squeezed out of the frugal four countries after a bitter argument, and so nothing more is likely to be forthcoming. Even worse, the Dutch secured an ‘emergency brake’ on spending, so they will be able to argue for years about how Italy or Greece use the money. Member states will also potentially be able to veto spending by other countries. That is a recipe for turning every bailout and infrastructure project into a pan-European row. If you are Dutch or German journalist with a taste for Eurosceptic clickbait, the next few years are going to be a lot of fun.

Thirdly, very little has yet been said about how the debt will be repaid. If you borrow money, you have to have some sort of mechanism to pay it back one day. The EU has plans for a plastics levy, but apart from that there is just some waffle about green and digital taxes. Those will be hard to agree, even harder to collect, and may well hurt the recovery as much as the extra spending helps it.

Even more worryingly, the shiny new EU bonds might end up rated as junk, or close to it. Why? Because every member state is ultimately on the hook for the money, so the ratings agencies may decide, quite rightly, that the EU bond has the same rating as Greek or Italian debt. Finally, the distribution of the money looks as if it will be completely political, with far more spent on grand French industrial projects in ‘green industries’ such as batteries for electric cars than rescuing small businesses in Italy and Spain.

There is no question that a genuine, functioning Recovery Fund was needed. Without one the imbalances within the Eurozone will just grow wider and wider. Germany and Holland will start to grow again a lot more quickly, and a lot faster, than Italy, Greece or Spain. The Recovery Fund is meant to fix that, and stabilise the Eurozone. But it will simply end up making its divisions far, far worse.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
House Republicans Move to Defund OECD Over Global Tax Dispute
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
Intel Reports Revenue Beats but Sees 81% Rise in Losses
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
CEO Resigns Amid Controversy Over Relationship with HR Executive
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
Tulsi Gabbard Unveils Evidence Alleging Political Manipulation of Intelligence During Trump Administration
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Trump Announces Coca-Cola to Shift to Cane Sugar in U.S. Production
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Air India Pilot’s Mental Health Records Under Scrutiny
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
Moonshot AI Unveils Kimi K2: A New Open-Source AI Model
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Bitcoin Reaches New Milestone of $116,000
Severe Heatwave Claims 2,300 Lives Across Europe
Declining Beer Consumption Signals Cultural Shift in Germany
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
×