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Author Topic: EU summit: Leaders reach landmark €1.82 trillion COVID-19 recovery deal  (Read 293 times)
Barnabe
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July 23, 2020, 09:43:09 AM
 #21

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EU leaders reached a landmark €1.82 trillion COVID-19 recovery package early Tuesday morning.

It comes after days of sometimes bitter discussions over the seven year budget and recovery package which includes jointly borrowing a €750 billion recovery fund to be shared as grants and loans.
Source: https://www.euronews.com/2020/07/20/eu-summit-deadlock-see-talks-stretch-into-sunday
Alternative source: https://www.ft.com/content/713be467-ed19-4663-95ff-66f775af55cc

Long overdue deal between EU countries for an assistance package has finally been finalized. It's a historic deal of great proportions. The compromise seems to have come in the fact that around half of the funds will be borrowed.

EU country leaders would like to project that they union is sturdy and stable, but the concession that had to be made might show otherwise. Countries that were notorious for their opposition to the deal initially had great offers made to them for their budget rebates. Essentially now, already rich northern countries that contribute little to the EU will be earning more, all over a pandemic that affected them less than the south. Just the fact that this compromise had to be made only for the deal to pass for me shows some weakness in EU's mechanisms.

Only 750 bn Euros are part of the corona recovery fund and out of that only 390 bn are outright subsidies for countries, the rest comes as loans from the EU. The biggest part of more than 1000 bn Euros is part of the budget for the next 7 years.So it will take some time for the money to be actually paid out.
And since the EU commission is raising money for the first time itself, the next generation will have to pay back these loans. Unfortunately its just another layer of debt being raised in the EU.
The good thing with utilizing lending as the union in its entirety, is having much greater bargaining power. The loan will be guaranteed by the union's so the interest rate could be very competitive. This is going to be most beneficial for the economies that have the potential of growth but had more risk investing into, like for example the south. I can see why it was an issue some of the wealthier countries pressed hard against, even managing to reduce the amount. But still it sets a good precedent for less developed countries that the north had been neglecting.
Yeah, but the southern countries have a higher interest rate to compensate the risk of default. We should not forget that Greece has partially defaulted on its debt. I believe only institutional investors were affected by this default, but it's still a non-payment of an owned debt by an European country.
Eurobonds might be good in theory, but IMO southern European countries are just bad managing money, creating a Eurobond will only transfer part of their higher interest rates to all of Europe.



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July 23, 2020, 11:22:31 AM
 #22

The good thing with utilizing lending as the union in its entirety, is having much greater bargaining power. The loan will be guaranteed by the union's so the interest rate could be very competitive. This is going to be most beneficial for the economies that have the potential of growth but had more risk investing into, like for example the south. I can see why it was an issue some of the wealthier countries pressed hard against, even managing to reduce the amount. But still it sets a good precedent for less developed countries that the north had been neglecting.

State governments always assume that debt is an instrument to solve problems. When in fact debt only prolongs the problem and adds to the problem. Adding debt means that the debt becomes sustainable. Increasing the budget for creditors means further aggravating the budget deficit while going forward for the debtor will be a time bomb especially in the midst of an uncertain situation of default is the most likely. In addition, the economies of European Union member countries are not aligned with the existence of instruments of mutual debt-laden with exploitation, although this is currently seen as a symbiosis of mutualism, this could trigger a chain of unity after all European Union countries have fallen into debt.

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July 23, 2020, 02:11:50 PM
 #23

The good thing with utilizing lending as the union in its entirety, is having much greater bargaining power. The loan will be guaranteed by the union's so the interest rate could be very competitive. This is going to be most beneficial for the economies that have the potential of growth but had more risk investing into, like for example the south. I can see why it was an issue some of the wealthier countries pressed hard against, even managing to reduce the amount. But still it sets a good precedent for less developed countries that the north had been neglecting.

State governments always assume that debt is an instrument to solve problems. When in fact debt only prolongs the problem and adds to the problem. Adding debt means that the debt becomes sustainable. Increasing the budget for creditors means further aggravating the budget deficit while going forward for the debtor will be a time bomb especially in the midst of an uncertain situation of default is the most likely. In addition, the economies of European Union member countries are not aligned with the existence of instruments of mutual debt-laden with exploitation, although this is currently seen as a symbiosis of mutualism, this could trigger a chain of unity after all European Union countries have fallen into debt.

At this point all countries will increase its debt. There will not be a single country that will not. Smaller EU countries will be able to get this loans cheaper as they would if they would not be part of EU. So is all good.  And will be all god if at better times this debt will be reduced.  But there is big but. We had better times in last couple of years and some countries were reducing its debt some did not. And that is very bad for those countries and ery bad fro politicians leading those countries and increased spending's just to be reelected.
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July 23, 2020, 05:53:38 PM
 #24

It´s easy to seperate 1 entity in 50 seperate ones, but it seems utterly impossible to unite 30 parts into 1. As a European, I think  it´s positive, since it´s in almost every country the same situation that there are already so many different regions that want to have different things compared to e. g. what happens in most capital cities. That makes it even worse on a bigger scale, like why should a cattle farmer from the French alps have a vote on Bulgarias refined petroleum industry? I give this EU till 2030, I don´t know even one person who enjoys being in that union....
Well that is because the union they are trying to make is artificial in nature, so despite what they say many people do not see themselves as European but as members of their own nations and as long as that mentality does not change then this kind of troubles will keep emerging.

In the US people have a lot of pride on the state they were born but when asked about their nationality they will never answer with Texan they will answer to that question naming themselves Americans, I know this may seem like it is not a big deal but it is and as long as this is the case then the European Union will eventually fail.
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July 25, 2020, 06:18:06 AM
 #25

It´s easy to seperate 1 entity in 50 seperate ones, but it seems utterly impossible to unite 30 parts into 1. As a European, I think  it´s positive, since it´s in almost every country the same situation that there are already so many different regions that want to have different things compared to e. g. what happens in most capital cities. That makes it even worse on a bigger scale, like why should a cattle farmer from the French alps have a vote on Bulgarias refined petroleum industry? I give this EU till 2030, I don´t know even one person who enjoys being in that union....

The parts aren't 30,they are 27. Grin
Anyway,the EU has some pros-the united market,freedom of traveling across countries,the support for the farmers and agriculture.I still don't consider the European Union to be a failed project.There's hope that EU will change for good.
The 1.8 trillion euro recovery deal is just more debts and money printing.It might have some short term impact over the EU economy,but the impact will be really small.
It's completely normal that all the leaders of the 27 countries have different opinions and goals.
The EU can't be like USA and it will never become a federal state.
Compromise isn't something bad.

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July 25, 2020, 08:41:35 AM
 #26

It´s easy to seperate 1 entity in 50 seperate ones, but it seems utterly impossible to unite 30 parts into 1. As a European, I think  it´s positive, since it´s in almost every country the same situation that there are already so many different regions that want to have different things compared to e. g. what happens in most capital cities. That makes it even worse on a bigger scale, like why should a cattle farmer from the French alps have a vote on Bulgarias refined petroleum industry? I give this EU till 2030, I don´t know even one person who enjoys being in that union....

The EU can't be like USA and it will never become a federal state.
Why is that ? Europe is already an entity superior to each countries own legal system, they are pushing for "coordinated" global finances and budget control. The final goal of Europe is to have a supranational entity controlling each state, which is de facto a federal system.



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