In the coming weeks we will review several regions and the measures they are taking to restart their economy. We will seek to predict and analyze some of those changes in the series Restart. In this nonconsecutive series, this week we will examine the European Union’s plans and look forward to reviewing other schemes aimed at moving economies from collapse.
EU leaders cemented a 2 trillion corona-virus relief package last week, in addition to its initial 540 billion euro package it approved in April. The approved deal has been in the works since March when the EU Commission prescribed a nearly 2 trillion fix for the Covid-19 battered EU economy in late May 2020.
When the plan was proposed in the EU Commission in Parliament, it passed by a vote of 505 in favor, 119 against and 69 abstentions according to a May 15, 2020 EU Parliament press release. In a critical pandemic, 119 votes against and 69 abstentions is a quiet, but telling indicator of lack of confidence among many in the administration of fiscal and policy measures in the Union. According to the May 2020 resolution, the following measures were determined:
” . . . the Package to be disbursed through loans and, mostly, through grants, direct payments for investment and equity, and for the Fund to be managed directly by the Commission; believes that money should go to programmed within the EU budget, enjoying full parliamentary oversight and participation, and being subject to appropriate auditing and reporting requirements; (2019-2024 European Parliament Resolution for the Multi-annual Financial Framework[MFF]).
Implementation of the package will be undoubtedly a challenge as the EU seeks to balance the needs of more disciplined members verses more unruly ones and the challenge to the EU’s validity in the current world context. Even the EU acknowledges that it is struggling for relevance in a world that increasingly doesn’t need the EU or its waning influence. The resolution notes, ” . . . one of Parliament’s main missions is to keep the executive in check; warns the Commission against the use of misleading headline figures when presenting its recovery plan; stresses that the Union’s credibility is at stake;”
Indeed, the credibility of the EU is at stake as it has been revealed that it has less and less to offer not only its member states, but the many nations it seeks to direct through foreign aid and diplomacy pacts. A part of the EU’s problems are not only exacerbated by its crippling financial management record reflected in middling GDP ratios which violation of the Maastricht Treaty, but also its newer Balkan acquisitions like Poland and Bulgaria.
Currently, Bulgaria has the lowest GDP per capita, according to 2019 numbers from the European Commission. The country of 7 million people comprises a unique mix of Greek, Slavic, Ottoman and Persian populace complicating the nations cohesion from age old grievances. Currently the nation has been battling unrest since mid July over corruption and ethnic strife. Since the induction of these states into the Union, the EU has seen slower growth and widening GDP/Debt Ratios.
Before its timely departure from the EU, Brittan saw its largest immigrating groups coming from the Balkans and adjacent regions like Poland. The Balkan problem is further exacerbated by the southern European countries like France, Italy and Greece whose ballooning debt and disenfranchised populace leave the world questioning EU and state leadership as well as their fiscal management. Such long term inconsistencies force world leaders to rethink the EU’s efficacy as a leader and contributor? What really is the EU contributing to the world or even its member states? Particularly in the age of Covid-19, it seems that it has been unable to reign in and focus Balkan members as Russia had in the past; which may leave Balkan states like Bulgaria and Poland to look toward more authoritarian governance models for stability. Such changes leave the world wondering about the EU’s real long-term financial viability because many of the world’s finance centers are situated within the EU. Even as every nation battles its own Covid recovery, the financial validity of the EU will be one to watch.