European Union leaders expressed cautious optimism about the economic recovery on Friday 25 June, as the recession caused by the Covid-19 pandemic was less severe than expected in 2020 and the imminent roll-out of the Next Generation EU Recovery Plan will support investment.
“The prognosis is optimistic”, said German Chancellor Angela Merkel, praising the “determination” with which Europeans have handled the health and economic crisis. “The recovery will be robust”, said the Spanish Prime Minister, Pedro Sánchez. The European Commission’s spring forecasts put Spain at the top of the list of Member States with an estimated economic growth of +5.9% of GDP in 2021 (see EUROPE 12719/2).
Both also warned of a resurgence of the Covid-19 pandemic, while the Delta variant of the SARS-CoV-2 virus forced Portugal to resume restrictive measures. “With regard to the variants, everything must be done to avoid the fourth wave”, Mrs Merkel urged.
Next Generation EU. The EU27 are counting on the extra growth that will come from the implementation of the national recovery plans that will be financially supported under the Next Generation EU.
The President of the European Commission, Ursula von der Leyen, recalled that twelve of the twenty-four national plans officially submitted have been forwarded to the EU Council for approval.
Dutch Prime Minister Mark Rutte described the EU institution’s analysis of national plans as “very serious”. He promised that his country would do the same. In July 2020, during the negotiations on the post-2020 budget, the Netherlands obtained the introduction of an ‘emergency brake’ that allows a State to alert its peers about a recovery plan that is deemed problematic.
“Recovery plans are becoming a reality and we can be happy about that”, said French President Emmanuel Macron.
According to Italian Prime Minister Mario Draghi, “the Recovery Plan and national fiscal policies will bring economic growth to a higher level than before the crisis” in Italy. Mr Sánchez said that the Spanish recovery plan was “ an opportunity to implement a countercyclical policy” and to resolve, through reforms and investments, some of the weaknesses of the Spanish economy, with an emphasis on young people.
The outgoing Portuguese Presidency of the Council of the EU is organising a high-level conference in Lisbon on Wednesday 30 June on economic recovery in light of the legacy of the crisis, as well as reflecting on the future of the European economic governance framework.
Banking Union. Meeting in an enlarged format, the euro area countries took note of the maintenance of a “favourable fiscal stance in 2021 and 2022” in order not to withdraw too prematurely the public support measures for the affected sectors.
They also ask the Eurogroup to reach agreement “without delay” on a stepwise and time-bound work plan including all the elements of financial risk sharing and reduction to complete the Banking Union.
The Eurogroup has given itself until the end of 2021 to finalise this work plan (see EUROPE 12745/12). After the parliamentary elections in September, the new German government should be in a position to take decisions on this matter.
For Mr Macron, it is necessary to “speed up the timetable for the Banking Union and the Capital Markets Union”.
Mr Draghi said he preferred no agreement at this stage to an unsatisfactory agreement. Italy favours financial risk sharing, with the creation of a European Deposit Insurance Scheme (EDIS), but opposes the creation of a risk related to bank exposure to sovereign debt.
Stability and Growth Pact. The European Commission is expected to relaunch the debate on the evolution of European fiscal rules in the autumn, the application of which has been frozen until the end of 2022.
Mr Rutte called for proposals that encourage “sound” fiscal policies that are conducive to growth.
Euro Summit statement: https://bit.ly/35R4fGt (Original version in French by Mathieu Bion)