For the EU, deciding how to fund the recovery is only half the battle

Photo by Maryna Yazbeck on Unsplash

The European debate on how to finance the recovery from the coronary crisis has been quite bitter, but member states have barely touched on the thorny question of who gets the money.

A glimpse of how difficult the conversation came with the controversy surrounding the Commission’s 37 billion euro Coronavirus Response Investment Initiative (CRII) initiative – an emergency relief effort that was proposed last month .
The money was collected from funds not spent in EU cohesion programs and was distributed in accordance with the rules governing the regional aid scheme. Like a report of the European Stability Initiative think tank showed this weekend, it meant that Hungary was a major beneficiary of the money although it was by no means as badly affected by the coronavirus as Italy .
While Italy has received 2.3 billion euros, Hungary, which has a sixth of its population, should receive 5.6 billion euros. The inequitable allocation of emergency funding clearly highlights the need to reform the EU budget process, said Gerald Knaus of the European Stability Initiative. “If this does not lead to a revival, then the EU is suicidal,” Knaus told the FT.
The irony of CRII is that it was adopted the same day that the Hungarian parliament gave strong Prime Minister Viktor Orban the right to govern indefinitely by decree. The money represents a boon for the government of a man who, according to his detractors, has put justice and a large part of his media to the wall while eroding checks and balances and forging links with Eurosceptics.
On one level, it is hardly surprising that Hungary has fared well from CRII. Like Elisa Ferreira, the commissioner who oversees regional funds, said on Twitter Sunday, the CRII was never intended to redistribute money, but rather to make funds immediately available on the basis of existing cohesion envelopes.
But while Commission President Ursula von der Leyen promises to make the EU budget the engine of recovery after the crown, the episode marks the start of a dispute over how controversial it will be to find universally accepted means of distributing future pots of money.
Already, the countries that are big beneficiaries of cohesion funding warn that they will not agree to redesign the budget which will divert money to the countries most affected by the crisis.
“I suspect that the rich countries will say that we should use more funds than we have and move them from cohesion policies to recovery and things like that,” said Tadeusz Koscinski, Polish Minister of Finance, at the FT. “Any funding for Covid’s response should be additional. We should not touch on what has already been agreed. “
For its part, the commission is likely to press for cohesion to be strengthened rather than raided. After all, the countries of central and eastern Europe that are more dependent on cohesion have also been economically congested by coronaviruses, and they are no doubt facing a steeper climb to regain economic health given their less advanced economies.
But the EU budget is ultimately decided by the member states. And the debate does not stop there. A battle is also looming over the criteria that will govern any stimulus fund that the EU moves away. On Thursday, the leaders will be invited to approve the Eurogroup’s suggestions that a fund should be raised to fuel economic growth once the blockages are eased.
Some EU capitals are already asking that funding not be too heavily biased towards the countries most affected by the coronavirus crisis. After all, no country has been spared the crisis.
“This stimulus fund must serve everyone,” said Luxembourg finance minister Pierre Gramegna to the FT. “I don’t think it should be reserved for countries with more problems. It is a symmetrical crisis – it must be accessible to all. ”
In his article, Mr. Knaus proposes the creation of a new mechanism to disburse stimulus funds in the event of a pandemic, dubbed “Administration of Solidarity and Democracy”, similar to the way the United States administered the Marshall plan after the second world war. Any EU country could apply for grants from the mechanism – provided that it undertakes to respect the values ​​of the EU treaties and the verdicts of the Court of Justice of the European Communities.
For his part, Mr. Koscinski simply insists that all countries must have a “fair share”. But what seems fair to an EU country is rarely judged the same way elsewhere.

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