Europe; The Commission’s recovery fund could be a game-changer

The combination of grants and loans contained in the EU Commission’s proposed recovery fund is an attempt to put a lid on the political row already brewing between EU member states over whether a joint response should be in the form of transfers or distributed via loans for which countries are independently responsible, writes Claus Vistesen from Pantheon Macroeconomics. However it’s unlikely to quell the political battle that is about to begin within the region, he adds. From a macroeconomic viewpoint, the idea of a joint-European response to cover the costs of the Covid-19 crisis is a no-brainer, he says, and if it succeeds, it will force a lot of people extolling the inefficiency of European policymaking to eat humble-pie. Politically, however, the EU-sceptic uproar over the announcement is as predictable as it is potent, he says. The EU will be accused of exploiting the Covid-19 crisis to tighten its grip via further “undemocratic” economic and political integration. This position is not trivial, and will not go away anytime soon, warns Vistesen.