Recovery Plan(s)

This week, German Chancellor Angela Merkel addressed the current state of the EU and the goals for the German EU Presidency in the Bundestag. Süddeutsche reports that she believes the pandemic has left the EU facing its greatest challenge yet. Merkel notes how the pandemic has revealed the weakness of the European project, when EU Member States were quick to react within their national boundaries rather than as a united front. She goes on to note the importance of solidarity and cohesion for Europe’s recovery. She highlights three main challenges for Europe: The shift to climate-neutral economies, transitioning to more digital solutions and assuming its responsibility on the world stage. At the same time, the recovery fund, championed by Merkel and Macron, should support the most impacted countries and sectors in the EU. The German Chancellor received backing from her own party as well as from the Green Party and the left for her priorities. However, they long for stronger ambitions for the climate, protecting the rule of law and helping social systems burdened under the pandemic. The far-right AfD vehemently rejects her recovery plans.

Italian Prime Minister Giuseppe Conte believes that the recovery fund will be vital in bringing reforms to Italy and helping it catch up economically with its neighbours. In an effort to reassure the EU that Italy would spend the money wisely, Conte stated that the money would help them work on a comprehensive investment plan to make Italy greener and more socially inclusive. The Local notes that economists have stated that Italy’s public bureaucracy, sub-par infrastructure, tax evasion, and slow digital transition are key to their problems. Italy was the first European country to be hit by the pandemic and is still overcoming the death of nearly 34,500 people. Italy, alongside Spain, fought hard for an EU recovery instrument prioritising grants rather than loans. Conte also thanks Germany and France for showing solidarity. He now has until September to come up with a detailed plan on how the funds will be spent. Starting Saturday the general assembly will begin debating general outlines.

Kauppalehti reports that Finland’s Prime Minister Sanna Marin said in a radio interview this week that the EU stimulus package is not just about saving individual Member States, but Europe as a whole. She points out that Finland has conditions that must be discussed before agreeing to the recovery fund. Her comments come after Italian Prime Minister Giuseppe Conte stated that the challenges faced by individual countries due to the pandemic should be shared. While Finland is not part of the so-called ‘frugal four’ group, which includes Sweden, Denmark, Austria, and the Netherlands, the country is nevertheless critical of the budget and recovery package and will seek to change the proposal including the size of the fund. Finland also feels that the repayment period should be shorter than 30 years.

In an Op-Ed in Altinget, the political advisor Jan Høst Schmidt stresses that the EU’s long-term budget and recovery instrument need to help Member States’ recovery from the coronavirus while investing in a digital and green future. The Danish government, alongside three other Member States, is opposed to the idea of the EU handing out more grants under the corona recovery plan. Denmark would also prefer a smaller EU budget in order to keep their annual expenditure down. Schmidt believes that countries which are supportive of a bigger EU budget, such as Germany and France, do so out of fear that Spain and Italy’s post-pandemic economic development can negatively impact the EU’s internal market. At the same time, Denmark could also benefit from a bigger budget, especially since Danish industries tend to gain from implementing green and digital initiatives. Despite the loss of the UK’s contribution to the EU’s budget, Denmark will not experience as large a net loss as other EU countries and will be able to maintain its low public debt and high appeal to investors.