Wang Hongyu: Germany and France initiate a 500 billion euro financing plan. Will the EU share debt?
(Source: Xinhuanet 2020-05-19)
Xinhua News Agency, Beijing, May 19th(Global Hotspot) Germany and France initiate a 500 billion euro financing plan. Will the EU share debt?
The leaders of Germany and France jointly proposed on the 18th that the European Union set up an economic recovery fund totaling 500 billion euros to help Europe, which has been hit hard by the new crown epidemic, revive its economy.
If the proposal is implemented successfully, EU member states will share the debt for the first time. However, some analysts believe that there are many obstacles to the implementation of the project, and it is not easy for all 27 member countries to reach an agreement on this.
[News Facts]
German Chancellor Merkel and French President Macron jointly attended a video press conference on the 18th and announced that the two countries had reached a consensus on the EU’s establishment of a 500 billion euro economic recovery fund.
The plan proposed by Germany and France is for the European Commission to raise funds from the capital market in the name of the EU to help the regions or industries most affected by the epidemic. Those who receive financial assistance do not need to repay the money, and debt repayment funds will be spent from the EU budget.
Merkel said that the new crown epidemic is "the most serious crisis in the history of the European Union" and the purpose of establishing this fund is to allow Europe to emerge from the crisis stronger and more united. Investments will focus on areas such as ecological and digital transformation.
European Commission President Von der Leyen called the initiative "constructive". The European Commission will come up with a relevant economic recovery plan on the 27th, and the content is consistent with the direction of the Franco-German initiative. European Central Bank President Christine Lagarde also welcomed the proposal, calling it "ambitious and targeted."
[In-depth analysis]
Once this proposal is implemented, it means that EU countries will share debt for the first time, and the resistance can be imagined.
According to EU regulations, this requires the consent of all 27 member states. Although Italy, Spain and other countries have expressed support for the initiative, Austria, Sweden and other countries hold different views. Austrian Prime Minister Kurz said after Germany and France announced the initiative on the 18th that Austria's position is consistent and that the funds obtained from the EU should be "loans" that need to be repaid, not "grants."
Germany was also firmly opposed to shared debt at first. German media analysts believe that Germany's change of attitude is also a helpless compromise. After all, the collapse of the EU's internal market will have a huge negative impact on Germany.
Wang Hongyu, researcher at the National (Beijing) Institute for Opening up, w88 casinosaid that in any crisis in the EU, it is very important for Germany and France to reach an agreement. However, this time the agreement between the two countries on the establishment of an economic recovery fund is only the starting point for negotiations among EU countries. The specific amount and implementation plan of the fund have yet to be discussed. If the fund can be established, the scale is not expected to be too large, and the EU is more likely to eventually provide support in the form of a combination of grants and loans.
[Instant comments]
Wang Hongyu said that the fund size of 500 billion euros is far from enough to solve Europe's economic problems, but this debt sharing approach reflects the importance that Germany and France attach to European integration. It also shows that European integration has a certain degree of resilience and can face some challenges instead of being helpless. This will inject confidence into the European economy and people.
In his view, European integration has always been moving forward in crises. Every crisis in history has not caused the EU to disintegrate, but has promoted the EU to achieve key institutional breakthroughs and made it more capable of action. In a crisis, countries need the EU to play a certain role, so the new coronavirus epidemic may actually be an opportunity for European integration.
[Background link]
Data released by the World Health Organization on May 19 show that the cumulative number of confirmed cases of COVID-19 in Europe has exceeded 1.89 million.
Europe became the "epicenter" of the global COVID-19 epidemic in March. However, as positive progress has been made in epidemic prevention and control, countries such as Germany, France, and Belgium have recently taken measures to lift restrictions in an effort to strike a balance between "preventing the epidemic" and "protecting the economy."
The European Commission predicted on May 6 that due to the impact of the new crown epidemic, the European economy will experience a "historic recession" in 2020, with the EU economy shrinking by 7.5% and the Eurozone economy shrinking by 7.75%. Paolo Gentiloni, the European Commission member responsible for economic affairs, said that Europe is experiencing an economic shock unprecedented since the Great Depression in the 1930s.
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http://www.xinhuanet.com/2020-05/19/c_1126006715.htm
