France Demands More From EU on Growth as U.S., China Race Ahead
French Finance Minister Bruno Le Maire urged the European Union to speed up disbursements from its flagship stimulus package after the Finnish government threw a potential wrench into the process of releasing the funds.
Le Maire and his German counterpart, Olaf Scholz, sketched out on Tuesday how they would use their share of the 800 billion-euro ($966 billion) recovery fund to invest in the bloc’s key priorities of tackling climate change and supporting digital development. Earlier, the Finnish government called into question how quickly it would approve the EU plan, which all member states must ratify before the bloc can start issuing debt for the projects.
The EU’s plan is crucial for powering an economic recovery in the midst of a global pandemic that has caused the deepest recession since World War II and left it lagging behind other leading economies.
Hindered by extended coronavirus lockdowns and a chaotic start to vaccinations, the euro-zone economy is only set to return to its pre-pandemic size in mid-2022. The U.S. has almost reached that point already and China got there last year.
“We have lost too much time,” Le Maire said. “China has resumed its growth. The U.S. is booming. The EU must remain in the race.”
The recovery fund is also a test of whether Europe can work as one to repair its economy, building on a breakthrough agreement between France and Germany a year ago to jointly issue debt for the plans. France is expecting a total of around 40 billion euros ($48 billion) in grants from the fund, while Germany, whose economy has suffered less in the pandemic, is set to receive nearly 30 billion euros.
The EU expects about a dozen member states to send their plans this week, ahead of an informal April 30 deadline. The bulk of the bloc’s remaining nations are expected to submit their plans in coming weeks, kicking off the process of assessing whether their proposed reforms and investments meet the criteria to qualify for aids.
During a cabinet meeting on Tuesday, the Spanish government formally approved its plan to invest Spain’s portion of the EU funds -- 140 billion euros in grants and cheap loans through 2026. The administration will send the details of its plan to the European Commission this week.
At the same time, national parliaments are continuing to ratify a law allowing the bloc to raise the 800 billion euros that will finance the pandemic stimulus package. If the ratification process is completed in time, EU officials expect to raise enough debt to finance a first tranche of grants worth 13% of each nation’s allocation by July, with countries receiving their first disbursement by the end of the month.
“The EU development fund makes it possible for all other EU states to take measures to emerge stronger from the crisis,” German Finance Minister Olaf Scholz said at the joint press conference. “We can now act together for a strong, unified and sustainable Europe.”
Germany said the plan will boost its GDP by about 2% over the long term.
Hitch in Helsinki
Still, the Finnish parliament’s constitutional committee ruled Tuesday that a simple majority would not be enough to ratify the stimulus package leaving the governing coalition needing to find an extra 17 votes in the 199-seat legislature. Prime Minister Sanna Marin is already struggling to hold her governing majority together after a key partner called into question her plans for the economy.
The stakes are higher for southern European countries that took a bigger economic hit in the pandemic and are requesting larger amounts. In Italy, Prime Minister Mario Draghi presented a blueprint on Monday to tap 191.5 billion euros in loans and grants from the fund for a national plan to spend 261.1 billion euros. That, his government estimates, could boost economic output by about 3.6% by 2026.
At least 37% of the money countries receive has to be spent on green investments and another 20% on the digital transformation. France said 50% of the measures it is presenting for EU funding are for climate transition and 25% for digital.
France has already begun disbursing its 100 billion-euro national stimulus plan, around 40% of which it expects will ultimately be financed in grants from the European fund. The measures it is presenting to the EU are all from the national plan, originally presented in September.
“Our political goal cannot be only to come back to the situation before the crisis,” Le Maire said. “Our political goal must be to have stronger economies with better technologies designed to fight against climate change.”
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