On 19 June, the heads of state and government of the European Union (EU) will begin to negotiate a billion-dollar recovery plan financed by the issuance of joint debt, an unprecedented ambitious strategy to lift the European economy out of the deep recession caused due to the coronavirus pandemic.RELATED
The countries disagree on different points of the proposal presented by the European Commission in May, but agree that it can serve as a basis for negotiation and that a joint response to a crisis that threatens to break the single market is required.
WHAT’S THE PLAN ABOUT?
The strategy proposed by the Commission is anchored in a Community budget for the period 2021-2027 that would be endowed with 1.1 billion euros. With the support of this budget, the Commission would issue debt in the markets to finance a Recovery Fund.
This Fund, the centerpiece of the plan, would have 750,000 million euros that would be distributed in turn to the States through the budget programs until 2024, of which 500,000 million would be channeled in the form of non-refundable subsidies and 250,000 million in form of loans.
HOW DOES THE RECOVERY FUND WORK?
It would have three pillars depending on the destination of the aid: to States, to companies, or to the reinforcement of programs that the pandemic has shown essential.
Of the 750,000 million that the Fund would have in total, 655,000 million (almost 90%) would go to the first pillar, that of aid to countries.
And within this first pillar, the main tool will be the Recovery and Resilience Facility, which would have 560,000 million euros of the total, most of which would be distributed in the form of grants.
Countries could use this tool to pay for structural reform and investment plans that will have to be previously approved by the Commission.
The rest of the money from the first pillar would be divided between an extra allocation in cohesion funds (55,000 million), the Fair Transition Fund and a reinforcement of aid to rural development.
For its part, the second pillar of the Recovery Fund aims to mobilize private investment and the most innovative measure is a Solvency Instrument, which will have 31,000 million euros in guarantees for the European Investment Bank (EIB) or others Financial intermediaries invest in the capital of companies that have been in trouble from the pandemic.
Added to this is the increase in the European investment plan InvestEU to 75,000 million in guarantees.
The third leg of the Fund will serve to create a European Health Program and strengthen the stock of community medical equipment.
HOW MUCH MONEY IS CORRESPONDING TO SPAIN?
The Commission has only pre-allocated by country the 655,000 million euros of the first pillar of the Fund. Up to 21.4% of it would correspond to Spain: 140,446 million, of which 77,324 million would be in grants and 66,122 million in loans.
It would thus be the second beneficiary only behind Italy (172,745 million).
Most of that 140,446 million for Spain would come from the Recovery and Resilience Facility, specifically, 61,618 million in grants and about 56,630 in credits.
Another 1,806 million would come from the Just Transition Fund, of which it is the fourth beneficiary; while the rest would correspond to rural development aid and additional cohesion funds, although Brussels has not published the country breakdown of these two items.
IS THERE A DEBT MUTUALIZATION?
Not quite. The system proposed by Brussels does not constitute the emission of Eurobonds that some countries, including Spain, were claiming, but it is close to it in the sense that the Commission will issue with the support of the Community budget, which is financed by the Twenty-seven.