European Union (EU) countries that receive aid from the reactivation fund run the risk of having to implement unpopular reforms, a matter hotly discussed in Brussels on the eve of the presentation of the first national plans.
The fund, the embodiment of European solidarity in the face of the pandemic, endowed with 750,000 million euros (almost 900,000 million dollars), could become a bone of contention between southern Europe, deeply in debt, and the so-called “frugal” states from North.
The instrument, fueled by an unprecedented mutualisation of debt, must finance the investments of the green and digital transition. But to overcome the initial opposition of the so-called “frugal” adherents of fiscal rigor, the beneficiaries will have to carry out guarded reforms.
In recent weeks, “the Commission has pressured Member States to undertake further reforms,” acknowledges a European diplomat.
The landmark agreement, concluded in July after difficult negotiations, foresees that it will include in its national plans a detailed timetable of reforms long called for by the EU.
Among these reforms are that of unemployment insurance in France, that of pensions, postponed to better times; the reform of the labor market in Spain; reductions in public spending in Italy, among others.
Most countries will deliver their plan by the end of April. The Commission will have two months to give its green light, and the Council of the EU, which represents the Member States, will have one month to validate them.
The European executive must be firm on the reforms. “If it does not, some states will strongly criticize the plans of others,” says this diplomat.
As of April 10, 23 of the 27 member countries had submitted a provisional draft, but none the final version.
– “Very demanding countries” –
“The negotiations are focused on reforms,” a European official confirmed to AFP. Countries must take into account “a large part” of the specific recommendations. “We know that we will not be able to impose very concrete commitments on every difficult issue. We will have to be flexible and find a balance, but some countries are going to be very demanding.”
No one expects there to be lockdowns in the spring, as Europe is criticized for its slowness in relaunching the economy. And this flagship project remains under threat until all member states ratify it.
Among the 27, ten have not yet responded, including Germany where the Constitutional Court questions the legality of the device.
Negotiations on national plans, started in March, must be concluded quickly to allow the first installments of money this summer, pre-financing that represents 13% of total grants.
For Spain and Italy, the main beneficiaries, they represent about 9,000 million euros (107,000 million dollars) out of a total of 70,000 for each.
The payments will then be staggered over several years, allowing unfulfilled commitments to be sanctioned later.
For Lucas Guttenberg, deputy director of the Jacques Delors Center in Berlin, the pandemic will modify the financial architecture of the EU, through these regular evaluations that will determine the unlocking of aid.
The future of the process will depend on its ability, thanks to financial stimuli, “to increase the ardor of reforms in the member states,” he estimated.
According to Guttenberg, the objective should be to arrive at “a permanent political procedure for the coordination of economic policies.”
However, for Jean Pisani-Ferry, associate researcher at the Bruegel Institute, the EU “would commit a serious political error” if it insists on conditioning subsidies on pension or labor market reforms, not directly related to the purpose of the investments.
“This does not mean that these reforms are not desirable, but if they face opposition in a country, the approval of Brussels will not make them more acceptable,” he explained to AFP, while defending the binomial “reforms and investments “.
“We are talking about considerable sums”, around 5% of the Gross Domestic Product of Spain or Italy. “It is a lot. Obviously, the EU cannot afford to waste these transfers and must ensure that the money will be spent properly.”
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