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EU economic stimulus package: these are the real winners of the money blessing

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Dhe next round of the distribution struggle has begun: On Tuesday, the EU finance ministers gave virtual advice for the first time about the plan of the EU Commission, which wants to pump 750 billion euros into the European economy with an economic stimulus package. The next video conference in the Eurogroup is planned for Thursday, because the ministers need to speak.

There are still significant differences over crucial points of the historically unprecedented package. About how high the share of Loans aid and what is the proportion of transfers that do not have to be repaid.

The Commission would like to only grant 250 billion in loans and 500 billion in transfers that do not have to be repaid. Net contributors like Austria want a higher share of credit.

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There is also a struggle for the conditions under which the money flows. Germany and other net contributors want the recipient countries to promise reforms and growth investments in return and that the money can only flow if these plans are followed.

Even the volume of aid is up for debate: Federal Finance Minister Olaf Scholz (SPD) insists that the Merkel-Macron proposal is sufficient for an economic package worth 500 billion euros. The Federal Government obviously considers the additional loans from the EU Commission to be superfluous; after all, aid loans worth 500 billion had already been agreed in the past few weeks, according to Berlin.

Discussions about the distribution key, which determines which country receives how much of the stimulus money, are delicate. This discussion is being driven above all by those countries that see themselves as losing the key proposed by the Commission: These include not only Austria, the Netherlands, Denmark and Sweden, the so-called economical four. Finland, Hungary, the Czech Republic and Belgium also think they are getting away too badly.

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Real European solidarity – – – – –

The first rough calculations by the EU Commission for the distribution of the money show which countries have the most to lose in the upcoming negotiations. The model calculation provides a guideline for how much the member countries will benefit if all twelve instruments of the economic stimulus program distribute their money according to the same key. The biggest beneficiaries of the economic stimulus program are therefore primarily in Southeast Europe.

Italy, which, together with France, had driven the discussion about joint EU aid, is getting the biggest chunk of money – 153 billion euros. Because the economically crippling but well-to-do country, which to date has been a net contributor to the EU, pays 96.3 billion euros into the economic pool itself, it gets a net 56.7 billion euros. This corresponds to 3.2 percent of the Italian economic output.

That’s a lot of money; measured in terms of economic performance, the contribution is, however, far less than suggested by the extremely emotional discussion of EU aid by Rome – especially since the money from Brussels is to be stretched over several years. The Commission uses the gross domestic product of 2019 for its calculations.

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The economic impact of EU money in Spain would be much stronger, which according to the calculations of the EU Commission can count on 82.2 billion in transfers and loan commitments. That would correspond to 6.6 percent of the Spanish economic output.

Aid could have a much greater impact in a number of smaller countries. Greece, for example, where hoteliers and taverns are particularly severely affected by travel restrictions, can roughly calculate around EUR 33.4 billion net from the package. That would correspond to 17.8 percent of the economic output in 2019. If one took the strongly slumped gross domestic product of this year as a yardstick, the economic effect would be a lot bigger.

The proportions are also very high in Bulgaria, where the expected aid accounts for 19.3 percent of economic output. In Latvia it is 11.8 percent, in Slovakia 10.5 percent, and in Portugal and Romania the share is just under ten percent of economic output.

Tourism very important for Croatian economy

EU aid will be particularly noticeable in Croatia, the youngest member of the European Union, which is currently in the Council Presidency. Croatia, whose economy is heavily dependent on tourism, coordinates the negotiations between the member countries.

According to the commission’s bill, the country can count on loans and transfers in the net amount of 12.1 billion euros. That corresponds to 22.4 percent of economic output in the past year.

“For the EU as a whole, the magnitude of the sums is reasonable. If the aid for Croatia really amounts to 22 percent, that would be enormous, ”says Guntram Wolff, director of the Bruegel think tank in Brussels. “Such dimensions are very rare even with aid programs from the International Monetary Fund (IMF).”

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The economic importance of the aid programs for Greece was even greater; The majority of the money at the time, however, went in the form of loans. “It was already unique at that time, both the amount and the relationship to the Greek economic output. There has never been such a large aid program as in Greece, ”says the economist.

The distribution criteria show that Southeastern Europe benefits so much from the economic stimulus program. For the core of the program, the so-called reconstruction instrument, the following applies, for example: the poorer the country and the higher the unemployment, the more money the country can expect. The slump in economic performance, medical corona problems or debt play no role.

The executive vice president of the EU Commission responsible for economic matters, Valdis Dombrovskis, has justified this methodology: “We want to help the Member States that can only react to this crisis to a limited extent and therefore need support,” he said recently in a conversation with WELT.

In the coming week, the heads of state and government want to meet by video and then talk about the economic stimulus program. An agreement is likely to be reached in July at the earliest, when they should meet again personally in Brussels for the first time. Until then, there is still a lot to be discussed between the capitals.

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