On July 21st, the EU summit reached an agreement on a "recovery fund" with a scale of 750 billion euros. The picture shows European Commission President Ursula von der Leyen (left) and European Council President Michelle elbowing at the press conference at the EU headquarters in Brussels. Xinhua News Agency/Midland
According to the European Union News Agency, on August 1, local time, the EU approved three national aid plans submitted by Italy, involving a total amount of 6 billion euros. The aid program is part of the EU’s "Recovery Fund" framework, which aims to help Italian SMEs seriously affected by the COVID-19 epidemic. This is the first time that the EU has implemented the aid plan since it adopted the "Recovery Fund" with a scale of 750 billion euros on July 21st.
Experts pointed out that the COVID-19 epidemic has severely impacted the European economy, which has aggravated the imbalance of economic development among the member States within the European Union. Through a number of economic stimulus plans, EU institutions not only sent positive signals to the market, but also demonstrated their determination to lead European integration.
Quick landing shows determination
"The EU’s approval of Italy’s national aid plan so soon is of obvious positive significance." Cui Hongjian, director of the European Institute of China Institute of International Studies, told this newspaper that the first is the stabilizing effect, and the "recovery fund" was quickly transferred from the paper negotiation level to the specific implementation level, which not only gave the EU member States in need a "reassuring" but also sent a positive signal to the market; Second, it is a demonstration role. Italy will provide reference for other EU member States to follow up their applications in terms of application procedures and investment direction of application funds; The third is to express determination. Through cooperation with Italy and other applicant countries, the EU has demonstrated its determination to revive the European economy and lead European integration.
The "Recovery Fund" is the largest financial expenditure plan in the history of the European Union, with a total amount of 750 billion euros, of which 390 billion euros are free grants and 360 billion euros are low-interest loans. Specifically, the "Recovery Fund" consists of seven independent plans, including 672.5 billion euros of recovery and resilience tools (including 360 billion euros of loans and 312.5 billion euros of grants), 47.5 billion euros of EU response plan, 5 billion euros of European Horizon plan, 5.6 billion euros of investment plan in Europe, 7.5 billion euros of rural development plan, 10 billion euros of special funds for transition and 1.9 billion euros of European rescue plan. Italy applied for three of the aid programs.
In addition, according to the agreement reached at the EU summit on July 21, the "recovery fund" was borrowed from the financial market by the EU as a whole, and was linked with the 2021— The 2027 EU multi-year budget framework is linked. This means that in the next seven years, the total financial expenditure of the EU will exceed 1.82 trillion euros.
"Do more than one thing." Cui Hongjian believes that this move first shows the EU’s idea of combining short-term crisis response with medium-and long-term economic restructuring and upgrading; Second, it reflects the EU’s determination to lead European financial integration, and adds means and tools to deal with similar public health crises and new debt crises in the future; The third is to stabilize the value of the euro and the financial market, alleviate the impact of the epidemic and Brexit on the EU economy, and re-establish market confidence. The EU’s economic aid plan combines multiple considerations such as fiscal stimulus, crisis relief and industrial layout. If it is successfully implemented, it will be of great help to stabilize the world economy.
With the relief of the epidemic and the implementation of a series of economic stimulus measures, the European economy shows signs of recovery. On August 3rd, local time, the latest data released by IHS Markit, a market research organization, showed that the purchasing managers’ index (PMI) of manufacturing industry in the euro zone rebounded from 47.4 in June to 51.8 in July, which was better than the market expectation of 51.1, surpassing threshold’s 50 for the first time since the beginning of 2019. Williamson, chief economist of IHS Markit, said that this shows that the European economy started well in the third quarter.
Unite with self-improvement to tide over the difficulties together
The COVID-19 epidemic has had an unprecedented impact on the global economy, and Europe has fallen into an unprecedented economic crisis. United self-improvement is the inevitable choice for European countries to cope with the crisis.
According to the French "Parisian" reported on August 2, with the outbreak of the epidemic, bad news came out every day in Europe. Consumption, investment and exports have fallen in unison, all growth drivers have stopped, and the number of unemployed people has increased sharply.
According to the report, the epidemic has aggravated the inequality between northern and southern European countries. Italy and Spain in southern Europe are the main victims of the epidemic. Previously, the two countries have experienced the financial crisis in 2008 and the sovereign debt crisis in 2012, and they have further fallen into recession in this epidemic, and there is not enough fiscal room for manoeuvre to deal with the crisis. France is a big country in aviation and tourism, and it is particularly affected by the epidemic. Spain, with tourism as its pillar industry, has a similar situation. Northern Europe suffered less damage, but it should not be underestimated. The German Federal Statistical Office announced that the gross domestic product (GDP) in the second quarter of this year fell by 10.1% year-on-year, becoming "the biggest decline since Germany began to count quarterly GDP in 1970". In the Nordic countries, within three months of the epidemic, the number of unemployed people also increased rapidly.
In the face of the impact of the epidemic, EU member states actively helped themselves. Germany adopted an economic stimulus plan with a total amount of 130 billion euros in June, after which a package of 750 billion euros of economic bail-out plan was introduced. France has announced that it will provide 45 billion euros of financial assistance to companies and employees affected by the epidemic, and provide 300 billion euros of state guarantees for corporate bank loans; After the introduction of the 80 billion euro emergency rescue plan, Italy has successively released about 750 billion euros of liquidity funds to provide loan guarantees to enterprises in difficulty; Spain, Portugal, the Netherlands, Croatia, Sweden, Norway and other EU member States have also introduced economic assistance and stimulus plans of different scales.
But these are not enough. The persistent epidemic has cast a lingering shadow over European economic recovery.
According to the real-time data of Johns Hopkins University in the United States, among the major EU countries at the end of July, the number of newly confirmed cases in Spain, France, Italy and Germany all increased by more than 15% week-on-week, and the number of newly confirmed cases in Spain increased by as much as 32.3%. According to the data released by Eurostat on July 31st, affected by the COVID-19 epidemic, the GDP growth rate in the euro zone shrank by 15% year-on-year and 12.1% quarter-on-quarter in the second quarter of this year.
The growing differences between Europe and the United States have also prompted the European Union to warm up. Cui Hongjian said that the travel ban, competition for medical supplies and vaccine research and development measures adopted by the United States in the early stage of the outbreak increased the rift between Europe and the United States. In addition, the results of the US election are still unclear, and the EU has a wait-and-see attitude towards improving relations between Europe and the United States. The structural differences between Europe and the United States have made some EU powers realize that the United States will not make inclusive concessions to the EU in order to maintain its leading position in the world. In the face of the economic crisis, all EU member States must take concerted action.
Slow recovery from multiple risks
European TV News commented that the "recovery fund" provided new opportunities for the EU’s economic transformation and helped to further promote the EU’s green economy development. However, in order to achieve the goal of green development, the EU must coordinate the efforts of EU member states, businesses and society to achieve more inclusive and equitable development.
Some analysts pointed out that a series of economic aid programs launched by the European Union are facing inevitable contradictions in the specific implementation process, which has added uncertainty to the European economic recovery.
"The use of aid funds faces problems such as efficiency, moral hazard and political pressure." Cui Hongjian believes that, first, rich European countries, such as the Netherlands and other "frugal five countries", will constantly exert moral pressure on recipient countries. If the recipient country does not invest the applied grant or loan in the right direction, or there are problems in its use, it will be the reason for criticism from rich European countries. Second, the political contradictions between Western European countries and Central and Eastern European countries have further intensified. Western European countries hope that the use of grants and loans can be linked to the political performance and democratic reforms in Central and Eastern European countries, resulting in practical political effects, so the supervision of the application and use of funds in Central and Eastern European countries will be more stringent. Central and Eastern European countries will not be willing to accept the mercy of the EU and Western European countries.
At present, European economic recovery is facing multiple risks, and the prospects for recovery are not optimistic. Recently, the European Commission released a new forecast report, which adjusted the decline of EU’s economic growth rate from the previous forecast of "7.4% decline" to "8.3% decline" in 2020. This indicates that the negative impact of COVID-19 epidemic on EU economy is more serious than before, and the economic recovery of major EU countries is not ideal. According to the report, Italy, Spain and France are the "three countries most affected by the COVID-19 epidemic" among the EU powers, and it is estimated that the economic decline of these three countries will be 11.2%, 10.9% and 10.6% respectively in 2020.
The Financial Times believes that the EU economy not only faces the direct impact of the epidemic, but also has a great impact on the EU economy due to factors such as Brexit and the conservative trend of global trade. Even if the economy recovers in the second half of the year, it will be a slow and long-term process.
Faced with multiple risks such as epidemic rebound, economic recession and internal differentiation, how can Europe maintain its strategic competitiveness in the world? Cui Hongjian believes that Europe is a region where moderately developed countries are concentrated. In the international pattern dominated by competition among big countries, Europe can only find a way out by uniting and strengthening itself. First, we should establish and maintain confidence in European integration, strengthen internal unity and develop strategic autonomy; Second, we should flexibly adjust our relations with the United States, keep a clear understanding of external threats and factors that undermine internal unity, and should not simply divide the distance between relatives and friends from the so-called ideology; Third, we should constantly improve our soft power, adhere to multilateralism and dialogue and consultation that we have always advocated, and actively promote dialogue among global civilizations, instead of returning to the old political framework of realism.
