As you know, one accident rarely comes alone. The Coronavirus has triggered a huge bill, especially in countries already plagued by poor public administration and government debt. Therefore, the countries of the Euro zone, led by the governments of France, Spain and Italy, have convinced Germany to go along with the idea of borrowing €750 billion and provide them directly to the sectors, regions and industries in the euro zone most affectedisla by the crisis.
Who should administer the multibillion ‘recovery instrument’? Correct, that is the job of the geniuses in the European Commission. In Denmark, the idea has been promoted by the left, which since March has been pushing to get the Social Democratic government to agree to joint debt with the euro zone countries to show what they call ‘solidarity’.
Two questions arise. One is pecuniary: should the Danes really jeopardize their relatively good creditworthiness for German carmakers, the French oil industry, the Italian and Spanish tourism industries or all sorts of other sectors here and there, which are naturally affected by draconian shutdowns and their governments’ lack of health emergency systems? Are we to be held accountable for what Emmanuel Macron’s government did or what the Socialist government in Spain didn’t do? It seems a bizarre rationale.
Read more here from Mikael Jalving at Nexit Denktank
Denmark is one of the four countries nicknamed the ‘Frugal Four’ – along with Austria, Sweden and the Netherlands – which had opposed grants as opposed to loans under the recovery fund, and also insisted on a seven-year EU budget not exceeding 1.0 percent of the blocs gross national income.
Source: EU Observer
WHAT IS THE MFF?
The MFF sets the limits for EU spending over seven years, as a whole and for different areas of activity.
It is spent on a raft of areas ranging from farm subsidies and regional development, to security projects, Erasmus student exchanges, research, fighting climate change, managing migration, security and defence.
WHY IS IT SO DIFFICULT TO AGREE?
Poorer countries always argue that richer net contributors to the budget should pay more, and there is inevitably an acrimonious stand-off. A failure to agree by the start of 2021 risks a spending freeze on many critical projects.
The 2021-27 MFF is even harder because Britain’s exit from the EU means there is less money in the pot: the departure of the EU’s second-biggest net payer will leave a 75 billion euro hole in the seven-year budget.
The first nut to crack is just how big the budget should be.
European Council President Charles Michel has proposed a figure of 1.094 trillion euros, equivalent to 1.074% of the 27 countries’ gross national income (GNI). The European Commission has sought a bigger budget equivalent to 1.11% of GNI.
Net beneficiaries – mostly southern and eastern states that get more from the MFF than they put in thanks to cohesion funds and support for their farmers – like the Commission number. They stick together in a group called “The Friends of Cohesion”.
Net contributors frown even on Michel’s lower number, and an alliance known as “The Frugal Four” – Austria, Denmark, the Netherlands and Sweden – insist the budget must not exceed 1.0%.
Germany, the MFF’s biggest net contributor, is sometimes clubbed with these four but is expected to be more flexible.
France, the number two contributor, wants to safeguard CAP funding for its farmers but is uneasy about the fiscal impact of a budget at the upper end of the range.
Net contributors are also fighting to keep a system of “rebates”, reductions to their contributions based on a complicated corrections system. Former British Prime Minister Margaret Thatcher pioneered the rebate in the 1980s, but net beneficiaries say it must now be scrapped.
Why You Should Root for the “Frugal Four”
Denmark, Sweden, the Netherlands, and Austria need not only to keep up their opposition, but to gather additional support for the status quo. It is thoroughly irresponsible to condition southern European nations to continuous bailouts from the north in every crisis, while failing to pressure for any significant reforms in the absence of crises.
The “Frugal Four” are a blessing in this time of great irresponsibility.
Source: Austrian Center