German need to understand it must fund post-pandemic recovery across Europe, the Spanish economy minister told CNBC on Monday, just days before another important meeting for the European Union (EU).
The 27 European countries that formed the EU remained at odds over how to reduce economic shocks from Covid-19, even though they were united a half trillion euro package for faster shopping needs earlier this month. Their main concern now is to present a second plan that will be dealt with a lot of debt related to the virus which is expected to creep throughout the region.
Nadia Calvino, Spain’s minister of economic affairs and deputy prime minister, told CNBC Monday that Germany has a budget surplus that is “sufficiently determined” to be used.
“Now, what we need is for them to understand that we also need to fund the recovery of other (EU) countries, that we need to fund the recovery of all of Europe,” he added.
That corona virus pandemic reappeared old divisions among the countries that make up the EU. Countries that are more fiscal conservative, such as Germany and the Netherlands, are reluctant to take unprecedented steps and issue mutual debt – a financial instrument often dubbed “corona bonds” – to face the economic consequences of the crisis. These countries argue that it is unfair for their taxpayers.
On the other hand, countries that are deeply indebted, such as Italy and Spain, say this is the only way to overcome the “symmetrical shock” of the virus. Italian Prime Minister Giuseppe Conte repeated last weekend that it was time for “corona bonds.”
However, Calvino said he had noted some openness from Berlin to design the so-called Recovery Fund.
“What I am seeing is a far more constructive approach on the part of Germany and I hope from now until Thursday, other countries, who may be more reluctant, understand that we need to find ways to fund joint recovery too, if we want to be effective and start our economy as fast as possible, “he told CNBC’s Squawk Box Europe.
The 27 EU heads of state held a video call Thursday to discuss more alternatives to dealing with the financial crisis.
MADRID, SPAIN – FEBRUARY 26: Minister of Economic and Digital Transformation Affairs Nadia Calvino attended the ‘Reino de España a la Trayectoria Empresarial’ award, in honor of Placido Arango ‘In Memoriam’ at the El Prado Museum on 26 February 2020 in Madrid, Spain.
To resolve disputes about mutual debt, the European Commission, the European Union’s executive body, has proposed to set aside a portion of funds from the next European budget to support various post-pandemic economies.
European leaders must come up with a new budget as soon as possible to fund European projects between 2021 and 2027 – regular but politically toxic exercises are carried out every seven years.
“The next European budget must be Europe’s answer to the corona virus,” Ursula von der Leyen, President of the European Commission, said last week.
However, by doing that, European heads of state will add another layer of complexity to the issue that has been debated.
The new budget involves transfers from each country to a joint European Union basket which is then redistributed throughout the region for various purposes. The main obstacle is deciding what should get funding, because governments often do not have the same political priorities.
“Hopefully EU leaders will face challenges on Thursday and agree on policy responses,” Florian Hense, economist at the Berenberg bank, said in a note Monday morning.
“Good or bad, the way in which the eurozone countries work together in the acute phase of the pandemic can shape perceptions about European integration for a long time in the future. It is better to immediately get it.”
to request modification Contact us at Here or [email protected]