Money talks in Slovenia as the EU’s recovery plan kicks in
Brussels goes back to its usual business this week, the European Parliament is in full speed and European Commission President Ursula Von der Leyen is getting ready for her State of the Union speech next week.
This week’s agenda will revolve around the EU’s economic and monetary policy with finance ministers meeting in Slovenia to discuss the main challenges ahead for the bloc as money from the recovery plan slowly kicks in.
In July last year, EU leaders agreed on a €750 billion recovery package that aimed at tackling the socio-economic consequences of the pandemic. Most of the money will come in the form of grants and loans directly channelled onto governments' bank accounts so that they can support investment projects, including those with green and digital goals.
To receive the funds, countries had to present a detailed plan on how they would spend the money. Both the European Commission and EU governments needed to give the green light before the funds could start flowing. Every six months or so, the Commission will look at the progress countries are making before deciding to unlock a transfer of cash.
So far, all EU countries except the Netherlands and Bulgaria have tabled their recovery plans and all except Poland and Hungary have been approved by the Commission. The Council still needs to give its approval.
This summer - one year after leaders sealed the deal on the recovery package - money started to flow. The Commission approved the first pre-financing agreements for countries which have made progress, including Luxembourg which received €12.1 million out of the €93 million total it will get over the coming years.
EU finance ministers will meet this week, firstly at a virtual meeting on Monday, and then for an informal exchange in Slovenia over two days where they will be joined by central banks governors to talk about the recovery package.
With many countries easing restrictions across the continent and around 70% of adults in the EU vaccinated, the bloc looks on track to see a growth boost over the coming months. However, over the past few months countries have been resorting to public investment to keep their economies afloat, which has led to enormous debts and deficits in their finances. This week, ministers will be discussing potential future fiscal scenarios and how to ensure a sound recovery.
But as countries adapt to the pandemic and economic activities accelerate, two questions need to be addressed: how to handle the public debt issue and deciding when would be the right time to put an end to the European Central Bank bond-buying programme which also helped countries navigate the 2012 debt crisis.
Some argue against continuing the crisis programme for too long while European Commissioner for Economy Paolo Gentiloni said in a recent interview that tightening euro-area monetary policy too soon would be a “big mistake.”
There’s a lot for the ministers to discuss as they will also be addressing the never-ending debate on the regulation of the banking sector, the need to ensure sound finances while boosting investment, and the future of taxation. All aspects will be key for the EU’s recovery beyond how to properly use the bloc’s fund.
What else the Eurocrat will be watching:
Negotiations over the EU’s green policy will be taking up much of Members of European Parliament’s (MEPs) time this year. On Friday, the Environment, Public Health & Food Safety, and Agriculture Committees will vote on their position on the so-called Farm to Fork strategy so that talks with the Council can start. The goal is to reform the EU’s food systems to make them more sustainable.