Daily Management Review

Hungary And Poland Veto To Coronavirus Stimulus Could Delay Recovery, Says EU Economics Chief


A recovery in the European Union could get delayed because of possibilities of a $2 trillion stimulus plan to combat the economic impact of the Covid-19 pandemic in the region may not be delivered as quickly as originally planned, said a worried economics chief of the EU.
In July, a decision to borrow funds jointly, via the European Commission was taken by the leaders of the 27 EU member states. That in itself was an unprecedented move as it ended a long-standing opposition to committing to joint borrowing by the countries that were more fiscally-conservative including Germany and the Netherlands.
Last month the deal was tweaked to link the disbursement of the funds with commitments to the EU’s core values — known as the rule of law. The total amount of the support package is 1.8 trillion euros ($2.13 trillion).
The agreement was however vetoed by Hungary and Poland, both of which have for long been investigated for alleged disrespect of the European values.
“I am confident on the outcome, I am rather worried on the delays that, in any case, we are risking,” Paolo Gentiloni, EU commissioner for economic affairs, said in a TV interview on Thursday.
The huge economic support package of the EU combines to link the disbursement of the funds with commitments to the EU’s core values — known as the rule of law as well as an additional buffer of 750 billion euros which is planned to be generated through debts from the public market. The EU had initially planned to start disbursement of these funds from January next year and the announcement when it was made was welcomed by financial markets.
The coronavirus pandemic has had a major economic impact on the European countries with more impact on those countries that have high levels of debts such as Italy and Spain. Combatting the economic fallout has been difficult for these countries and they have called for a solution for the entire EU to tackle the immediate impact of the public health emergency.
Compared to earlier this year, more favourable market access conditions currently prevail in the EU nations, but with the delay in the actual disbursement of the support package will worsen the conditions of the weaker economies of the region.  For example, till the money actually arrives, governments may choose to put on hold certain infrastructure investments.
“I am confident we will (overcome the impasse) in the next days or weeks. We should not have too much delay because as (ECB President) Christine Lagarde was just saying, we need a swift approval of these funds,” Gentiloni also said.
The stimulus package “must become operational without delay”, Lagarde said while apeaking to European lawmakers on Thursday.
An 8 per cent fall in gross domestic product for the euro area this year is being expected by the European Central Bank.
“We are in a difficult moment because we have to decide whether the fundamental principles of rule of law are deeply rooted in our mind or not,” Manfred Weber, a conservative lawmaker at the European Parliament, said.
“If you spend so much money,” he said in reference to the 1.8 trillion-euro fiscal plan, “then it is our conviction that you have to link this to the fundamental basic principles of independence of judiciary and freedom of media.”
(Source: www.cnbc.com)