Calm: Italy has not yet obtained 172 billion from Europe


This morning several Italian newspapers celebrated the proposal made yesterday afternoon by the European Commission on the Recovery Fund, the main European instrument to support the economic recovery after the peak of the coronavirus pandemic. The headlines on the front page speak of 172 billion euros “torn” from Italy and a “green light” on the overall plan. In reality, the Commission’s proposal is only a starting proposal, which will be negotiated by the governments of individual countries in the coming weeks: consequently the figures could change – and almost certainly will, knowing how European negotiations work – and will not be available to the Italian government in the very short term.

The Commission’s proposal has been praised across the board by analysts and observers for its ambition, and for putting further aid on the table than the compromise found last week by France and Germany. According to internal tables released by the Commission, the proposal foresees that Italy will be the main beneficiary of the Fund: if the plan is approved without any changes it will receive 81.8 billion of grants and 90.9 billion of subsidized rate loans, in other words, around 172 billion out of the 750 envisaged by the Fund.

In reality, we are talking about an indicative figure, which could change a lot in the coming weeks, not to mention the next few years.

The first thing to understand is that the European Commission proposal is only a proposal. The European legislative process provides that the most complex measures are approved by all institutions: the Fund will therefore have to go through the European Parliament – which should approve it without worries – but also from the European Council, the body that includes the heads of state and government of the Union, and later filed by the Council of the European Union, where the ministers responsible for each issue gather. In the last two locations, in particular, European rules provide that every more delicate measure is approved unanimously. Several observers are also convinced that the Fund has such a significant scope that it must also receive approval from individual national parliaments.

In each of these passages, the Commission’s proposal could undergo important changes on the most delicate points, which have already been discussed for months: the total availability of the Fund, the way in which to collect and distribute the money and the conditions to be asked of the states. “The most widespread belief is that huge obstacles remain on the road to unanimity,” commented the Financial Times a few hours after the announcement of the Commission.

In recent days the most economically conservative European countries – Austria, the Netherlands, Denmark and Sweden – had made a much less ambitious proposal than the compromise reached between France and Germany, and after the Commission proposal they reiterated their concerns .

“There is a risk that the proposal will lead to an increase in Sweden’s contribution to the European budget,” said Swedish Prime Minister Stefan Löfven. “The positions are very far apart and unanimity is needed: the negotiations will take time and it is difficult to imagine that this proposal will be the definitive one”, hypothesized a Dutch diplomat speaking with Politic.

The more conservative countries also request that the Fund have less than € 750 billion in funding provided by the Commission, and that the European Union not collect money on financial markets by issuing debt e not distribute the money raised through a non-repayable loan but only through loans, as the proposal announced yesterday provides. The four countries also argue that the European Union must impose specific limitations on the use of the Fund’s money, and that the main beneficiaries undertake to control their budget.

It is inevitable that some of these requests will be granted: everyone’s votes are needed to approve the Fund, and the Commission and the governments most involved in the negotiations – Germany and France, for now – could reduce the total availability of the Fund, or introduce stringent mechanisms for surveillance of beneficiary countries. The Commission’s proposal already contains some measures that are very popular with conservative countries, such as a rather contained proposal for the European Union’s multi-year budget and above all the conservation of rebates, that is to say essentially the discounts on contributions to the Community budget agreed by the Northern countries.

Several observers are convinced that the pressure exerted by other countries to approve the Fund will be powerful enough to convince even the most conservative. As in any European negotiation, however, each country will have to get something to claim in front of its public opinion, even symbolic. Their approach is not caused by a particular malice but by a historical distrust of its electorate towards the countries of the South, accused of spending a lot of public money on expensive and inefficient state apparatuses: with some reason, in some cases.

The primary surplus has also been revised upwards: it is the value that measures the difference between the income and expenditure of the state before paying interest on the debt (it essentially measures how many resources a state “withdraws” from the economy to pay its debt public).

Furthermore, the European Commission could also impose some conditions on the main beneficiaries, which are less political in nature but no less difficult to achieve. Federico Fubini, deputy director of the Corriere della Sera with a past as a correspondent in Brussels, he argues, for example, that the Commission will ask Italy for “civil justice certain in time and in results and for an administration that is put in a position to function”, so as to spend the most efficiently funds that will come.

Then there is the question of timing. National governments are expected to discuss the Commission’s proposal in the coming weeks in order to arrive with a draft agreement at the European Council on 19 June. Many fear that it will take longer to find a compromise, and there is already talk of a new Council to be held in July.

If the proposal is also approved in the form requested by the Commission and on schedule, the Fund’s money will hardly be distributed before 2021. “The weakest point of the plan is the absence of fresh money for Southern countries by 2020” , commented analyst Mujtaba Rahman, who works for the Eurasia Group consultancy.

The Commission proposal has linked the Fund to the new multi-annual budget of the Union, which will be in force from 2021 and 2027 and has yet to be approved. To launch the Fund by 2020, as insistently requested by several countries including Italy, the Commission has proposed to individual countries to advance 11.5 billion euros from the contributions they will pay by 2027. National governments have always been reluctant to anticipate or increase its contribution to the European Union, and things will hardly change in the short term.

Regardless of when the Fund will start, finally, it will take months and in some cases years for the money to arrive at its destination, unless there are emergency procedures. He wrote it in the magazine The glass door Daniele Viotti, a former European Parliamentarian from the Democratic Party who has often dealt with budgetary issues in the past. «After the approval of the multiannual budget, the European Commission, with its Directorates General, will have to write the rules and regulations to access these funds, calls will probably have to be made, time will be left to States, local authorities, Universities and companies to write their own proposals which will then have to be evaluated and financed “.

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