European leaders reach an historic agreement on Recovery Fund

The day of 21 July 2020 is already historical for the European Union and will be remembered for decades ahead. After four days of unremitting negotiations, EU leaders have reached a breakthrough agreement on the Recovery Fund, a € 750 billion package that will help european countries to recover from the disruptive effects that the Covid-19 caused to the economy of the Old Continent.
Yet another time, both Germany and France played a crucial role in advancing the progresses of the deal. Showing further signs of their amitié, they wrote the focal points of the Recovery Fund together, which had to be “ambitious, temporary and targeted”, also highlighting its main purpose, directed at enhancing the “resilience, convergence and competitiveness” of the European economies. All of these Franco-German proposals received a positive feedback from the President of the European Commission Ursula von der Leyen. Despite her enthusiasm, however, EU countries formed from the very beginning two sides with very distinctive views on the Fund. On one side, the most hit nations by the pandemic such as Italy and Spain, asked for substantial sums without heavy conditionality in the name of common solidarity. On the other side, the so called ‘Frugal Four’ countries, formed by Austria, Denmark, the Netherlands and Sweden, that are notoriously against excessive and irresponsible spending, could accept only loans with very strict requirements.
Due to these contrasts, French President Emmanuel Macron and German Chancellor Angela Merkel had to act as the mediators of the summit, which was reported to be one of the most tense in EU’s history. The path to consensus was marked indeed by many obstacles. Firstly, the ‘frugals’ fought relentlessly to reduce the package to € 350 billion in grants along with € 350 billion in loans. Supported also by Finland, the most uncompromising group put rebates to their EU budget contributions as a condition to conclude the deal. Another sign of conflict was represented by Dutch PM Mark Rutte, who arrived in Brussels with a less than helpful attitude towards Italy. In fact, Rutte believed that the country had to learn to face the crisis on its own, with reforms aimed at increasing the productivity of the ‘bel paese’, as well as its fiscal integrity and transparency. In addition, one edition of the Dutch weekly Elsevier Weekblad published in May featured on its cover a depiction of national stereotypes, showing at the top efficient Dutch workers in contrast to some Mediterraneans, relaxing under the sun. This portrait was labelled as ‘outrageous’ by Italians, and raised additional tensions with the Netherlands.
In this frame, Angela Merkel pointed out that it wasn’t right to “talk about the northern countries, the southern countries and the eastern countries”, adding that in planning the Recovery Fund it was essential to taking into account the huge burden that countries like Italy and Spain had to face in economic, emotional and medical terms, and thus it was “right for Germany to think not just about itself”. The position of the german Chancellor has proven to be an astonishing example of the capacity to go beyond national interests for the good of the whole continent. It is also worth to highlight that the Union does not have a common fiscal policy, but it has demonstrated to being able to put in place fiscal coordination when needed, which shows the EU’s readiness of action in case other crisis will rise up in the future.
Having to tackle its deepest recession in history was not an easy task for EU leaders. But the result of sleepless nights was certainly worth the sacrifice. Both Italy and Spain will benefit largely from the contributions, and the ‘frugals’, in addition to a significant increase in rebates to contribute to the EU budget, can also count on a provision which allows any country to trigger an ’emergency brake’ on payments in case of suspicion that a government has not fulfilled its reform promises. Furthermore, the Fund will help the European Green Deal, whose purpose is to create a more clean and low-carbon economy, as well as shaping Europe’s digital future. It can be deduced that citizens of the Union will have a transformed Europe in the years ahead, but as the negotiations for the Fund has showed, its fundamental values of solidarity, freedom, democracy, equality and the rule of law will remain the same.