Eurobonds, Corona bonds, debt union – is Europe at a crossroads?
More and more, higher and higher. That is how one might describe the programmes currently being launched – both at national level and by the EU – to tackle the consequences of the coronavirus crisis. A billion is becoming the smallest unit of calculation. The European Central Bank (ECB) is increasing the volume of the Pandemic Emergency Purchase Programme (PEPP) by a further 600 billion euros to a total of 1.35 trillion euros. At the same time, the programme is being extended until at least mid-2021.
Although the 540 billion euros in coronavirus funds already made available:
- €240 billion from the European Stability Mechanism (ESM),
- €200 billion from the European Investment Bank (EIB) and
- €100 billion from the European Commission (SURE)
These funds have not even been fully utilised yet, yet the European Commission has recently launched another comprehensive recovery programme with a total volume of 750 billion euros. This money is to be raised on the capital market, and the 27 Member States are to jointly guarantee it. Repayment is set to begin in 2028 (as part of the EU’s financial framework two terms from now) and be completed by 2058. This marks the first time the EU has taken on long-term debt.
Added to this are calls for greater harmonisation, EU bank liability, long-term EU debt and – unsurprisingly – higher taxes and separate EU taxes.
Currently, the Covid-19 relief packages already total over 2.6 trillion euros. This figure does not include further trillions of euros for EU projects (the Green Deal, digitalisation, healthcare, etc.), the ECB’s TARGET II balances, or national relief programmes and measures. If one were to add all this up, one would be talking about an additional financial framework that significantly exceeds the 7-trillion-euro mark. In the interests of European taxpayers, it is high time to address these figures.
Whilst the southern Member States are calling for development aid, the northern Member States (led by Sweden, Denmark, the Netherlands and Austria – the ‘frugal four’) insist on earmarked funds with clearly defined repayment dates. On the one hand, there are calls for greater European (financial) solidarity; on the other, for greater budgetary discipline and a willingness to reform.
Europe is at a crossroads!
Regardless of the ultimate outcome of the negotiations, ‘Next Generation Europe’ and the other Covid-19 relief measures will bring about lasting change to the European Union. The crucial question is: to what extent?
With this summary of the planned measures – which are now to be implemented to tackle the COVID-19 pandemic and for further programmes – we would like to offer some food for thought, so that we do not jeopardise our ability to act on behalf of future generations.