The EU turns into a “debt Fund”?

The leaders of the EU countries as a result of complicated four-day talks agreed at the summit in Brussels seven-year plan for the EU budget and the size of the Fund for the economic recovery of countries affected by the pandemic covid-19. The total amount of funds $ 1.8 trillion euros. Of these, 1074 billion will be allocated under the seven-year budget plan of the EU 2021-2027 years. The most fierce disputes were caused by the size of the so-called “recovery Fund”. The total amount of this Fund will remain unchanged at 750 billion euros, as from the very beginning suggested by France and Germany.

However, as a result of the desperate resistance of a small and rich European countries (the Netherlands, Austria, Denmark, Sweden and Finland) strap of grant aid was reduced to 390 billion euros, the grants to States recipient will not have to return to Brussels. The remaining 360 billion — these are loans that must be repaid until the year 2058.

The amount of 750 billion euros the EU will have to take on the global financial markets, the debt will be repaid by joint efforts of all EU countries.

German “die Zeit” (Die Zeit) asks the question: what does “recovery Fund” established in Brussels? An act of European solidarity or a violation of the national sovereignty of European countries? In any case, according to observers, the establishment of the Fund is an important precedent that turns the EU into a “debt Union” (Schuldenunion), in which the more affluent and developed countries to Finance poorer neighbors in the “European communal”. The EU is in fact “transfer Union” in which the countries of Central and Northern Europe will compensate for a lack of competitiveness of the South by transferring part of their income.

Although supporters of the “United States of Europe” welcomed the agreement and called his victory “the Pro-European course,” nationally oriented politicians consider the creation of a Fund in excess of authority by the Commission. Member of the leadership of the party “Alternative for Germany” Alice Vidal said: “the Final “fall” of Europe took place. The so-called “recovery Fund” illegal, the EU assumes the debts, not having the attributes of a state or the highest financial authority. As a result, Germany vouch for money which are beyond the control of its Parliament and the budget.”

In other words, said “die Zeit”, the Commission behaves as if it has state and financial power. And it sets a dangerous precedent. In fact, observers say, “drop the debt” already exists. Despite the long resistance of Germany, Chancellor Angela Merkel supported the initiative of the President of France Emmanuel Makron, to save the EU from collapse and preserve the single market.

German Finance Minister Olaf Scholz believes that the “rescue Fund” of the EU has historical significance and compared his creation with the decision of the American Secretary of the Treasury Hamilton, who created in the end of XVIII century the US bond market, at the same time giving Congress the right to control government spending. Indeed, from now on, bonds of the Commission become obligations of the EU, and not individual members. Thus the market got a new reliable asset that can compete with American securities.

In 2019, Germany paid 13.4 billion Euro in “common Fund” of the EU. Poland received 12.3 billion euros, Greece — 3.4 billion. Many in Europe consider unfair the fact that Hungary and Poland are getting huge money from the EU and thus violate the legal principles of the European Union.

Greece also receives money from EU funds to pay their exorbitant debts, but it does not conduct administrative reforms, and does not create conditions for investment. This requirement explains the demand of Austria, the Netherlands, Denmark, Sweden and Finland — to provide reports on what and how they were spent European money.

This position is supported in the default, German Chancellor Angela Merkel, but not ready to accept the countries of Eastern Europe. The Prime Minister of Hungary Viktor Orban called the Dutch Prime Minister Mark Rutte “the enemy of Hungary” only because he insisted on the strict observance of the European norms.

French “Tribune” (La Tribune) sums up EU summit: “from Now on, the European Union becomes a state which is not a substitute for the 27 member States of the EU, but actually includes them in their structures. The main feature of the new state is the fact that it is able to issue bonds to Finance “recovery Fund” the size of 750 billion euros.”

Observers believe that the reform of the EU Finance has started. However, it faces opposition in the European Parliament. So far, the deputies refuse to approve the draft budget in its current form and require the allocation of additional funds for climate protection and student program Erasmus. They also want to reduce subsidies to agriculture and to focus on the technologies of the future. The final vote on the draft budget held in the autumn.