The “Thrifty four”: how the pandemic split the EU

«Экономная четверка»: как пандемия раскалывает ЕвросоюзThe European Union has been split over the approaches to the coronavirus crisis. Austria, the Netherlands, Sweden and Denmark in opposition to the Alliance of France and Germany unveiled its plan to support the economy of the European Union. The leaders call themselves “Thrifty four” as strongly disagree with the plan Rules and Merkel on granting subsidies to the victims of the pandemic, the countries of the Commonwealth.

The essence of the proposal of Vienna, Amsterdam, Stockholm and Copenhagen is to create a special Fund that will operate for two years. Its goal is stabilization and strengthening of the EU economy. Moreover, its distinctive feature is that the affected countries will be allocated subsidies, and loans.

Most loans will be single, and their scope is strictly limited. To spend money for research and innovation, the development of the health system and the transition to a green economy.

The “Thrifty four” agree that the EU member States receiving support, should return these funds.

In addition, they believe in the necessity of structural reforms in the countries that will receive loans.

With such statement do not agree, the representatives of southern Europe, which, in fact, already caused some controversy on the stage of the first package of emergency aid from the European Union. It amounts to €540 billion, which Austria, the Netherlands and Germany offered to dispense with the use of the European stability mechanism (ESM).

This point is criticized in Italy and Spain the most affected EU member States, because the allocation of funds through the ESM provides for the transition to a policy of austerity. The countries of southern Europe noted that they should not be punished for the crisis caused by the pandemic, and that the encumbrance of their large debts impede the economic recovery of the entire European Union. The parties came to a compromise, reducing the requirements for assistance by the stabilisation mechanism, but still leaving the credit component.

Austria, Denmark, the Netherlands and Sweden, opposing the plan of Germany and France, set a certain trend, which was subsequently joined by Hungary. In Budapest agreed that eliminating loans in favor of subsidies is a wrong decision in a crisis.

The proposal of Berlin and Paris suggests the creation of a Fund of €500 billion, which will provide financial support for those affected by the pandemic in the EU member States.

The main difference between this initiative from past proposals that we are talking about budget subsidies for European countries, not loans. The German-French Fund will receive funding from the European borrowing in financial markets on behalf of the EU at a favorable rate.

In this German-French plan should be a part of the overall EU budget for the years 2021-2027 and allow the affected countries to restore the economy, without falling into dependence on its allies.

Along with opponents from the German-French initiative emerged and supporters. For example, a number of Eastern European States,generally praised the proposal, although noted the lack of important variables in the submitted proposal. In particular, in Poland called on to clarify the mechanism of distribution of funds only after verification of these rules Warsaw would be ready to make final conclusions.

At the same time in Slovakia is convinced that the initiative must include “a clear incentive” for carrying out structural reforms in the affected States. As said Slovak foreign Minister Ivan Korcok,

this plan must be “fiscally responsible” — all EU member States must have access to new subsidies.

Positively expressed respect to the German-French plan in Belgium, according to the head of Finance Alexandra De Croo, the proposal must Europe — a combination of solidarity and responsibility.

In addition, supports the initiative of Spain, Prime Minister Pedro sánchez called the plan of Germany and France step in the right direction, which meets the requirements of the Republic.

The differences in EU members is the main problem of any anti-crisis plan. Whether the program Austria-Sweden-Denmark-Netherlands or the German-French proposal for the realization of the need to have them approved by all 27 countries of the European Union.

In such conditions none of the plans does not seem to pass: the Northern EU member States have been able to push its position during the discussion of the first package of economic support and is unlikely to back down when discussing the second.

Southern EU countries are strongly against credit bondage.

Particularly radical is the position of Italy, for which even the Franco-German plan is not fully satisfactory.

According to the Italian Prime Minister Giuseppe Conte, this is a good step on the way to a common response to the pandemic, but the EU needs to do much more.

“Europe cannot afford to repeat the mistakes of the past, making too much or reacting too slowly. Failure to act quickly will lead to a dramatic expansion differences between the countries-EU members. Left unchecked, this crisis will jeopardize the whole European project, because our market has not kept pace with other leading economic powers,” wrote Conte in his article for Politico.


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