Deal! EU reaches agreement on budget and COVID-19 stimulus fund

Chips Lovell · 21-07-2020 05:19AM #1

It was meant to last until Saturday night but only finished up this morning, making it one of the longest ever round of EU negotiations, but it looks like we have a deal.

Key sticking points included the amount and oversight of COVID-19 stimulus funds. Grants of €500 billion were originally proposed, but that's been trimmed to €390 billion, but with €360 billion of low interest loans. Request for a veto on spending by the so-called Frugal Four didn't come to pass, but there is a compromise in the form of a review mechanism, which allows them to pause spending for three months while a review is being carried out.

One of the other big sticking points was the so-called Rule of Law issue, mainly concerning Poland and Hungary, where there were calls to withhold funding from states who didn't uphold the rule of law. That hasn't succeeded in this round of talks, but by the sounds of the way it has been kicked to touch, it may be only a matter of time before there is some movement:

The compromise agreed by the leaders instead puts off designing a rule of law mechanism for another day with agreement to be made by a qualified majority of member states.

Haven't seen any details yet on how it all breaks down for Ireland.

Dufflecoat Fanny · 21-07-2020 05:22AM

will personal loan rates drop now I wonder

LuckyLloyd · 21-07-2020 07:40AM

Fantastic news, delighted they were able to get a deal through for the southern countries most badly affected by this. I assume we will be net contributors to the fund.

johnnyskeleton · 21-07-2020 07:48AM

The great thing about the operation of the EU is that it usually manages to get a compromise, and this sounds fairly reasonable.

Ive been following the daily express coverage of the talks with morbid facination as each turn in the EUs negotiations was seen as a sign that the fragile Union would collapse, even though such robust debate is not entirely unknown to the EU. So I had to check what they made of this final compromise:

https://www.express.co.uk/news/politics/1312149/EU-news-coronavirus-recovery-fund-budget-summit-deal-Angela-Merkel-latest-update

Apparently its gone from a fragile trade bloc on the verge of collapse to a"federal SUPERSTATE" overnight!

Chips Lovell · 21-07-2020 08:25AM

LuckyLloyd wrote: »

I assume we will be net contributors to the fund.

I would expect so, but I haven't seen how it's structured yet. All I've read is that it'll go to the countries worst affected. I don't know how that will be determined.

johnnyskeleton wrote: »

Apparently its gone from a fragile trade bloc on the verge of collapse to a"federal SUPERSTATE" overnight!

You'd almost think that they never paid attention to EU negotiations before?

Melanchthon · 21-07-2020 09:10AM

Chips Lovell wrote: »

I would expect so, but I haven't seen how it's structured yet. All I've read is that it'll go to the countries worst affected. I don't know how that will be determined.

You'd almost think that they never paid attention to EU negotiations before?

If it's determined as talked about previously Ireland is going to get screwed by this with one of the lowest amounts received despite being more affected than a lot of European countries.

thegetawaycar · 21-07-2020 09:56AM

I'd expect we will get a very, very small piece of this but I hope at least if we had any decent negotiator at the table our piece of the pie will be in the form of grants only.

We're a net contributor to the EU, have been hard hit financially by COVID and will be paying off debt until the end of time from when we were "encouraged" not to burn bondholders.

While I think the Southern countries will get a larger portion of the pie, lets be clear our budget deficit would be at their levels if we had the public health systems they have.

ancapailldorcha · 21-07-2020 10:19AM

Melanchthon wrote: »

If it's determined as talked about previously Ireland is going to get screwed by this with one of the lowest amounts received despite being more affected than a lot of European countries.

Is Ireland that badly affected though?

Source (I know there are non-EU countries but I think this is still valid):

https://www.statista.com/statistics/1104837/coronavirus-cases-europe-by-country/

This is going to be a defining moment for the EU one way or the other. I found it incredibly depressing when the northern "frugal four" were lobbying for loans instead of grants. It's exactly that sort of insular thinking that could lead to the eventual sundering of the project.

Chips Lovell · 21-07-2020 10:32AM

Melanchthon wrote: »

If it's determined as talked about previously Ireland is going to get screwed by this with one of the lowest amounts received despite being more affected than a lot of European countries.

According to a report in the Irish Times, the "calculation of need" was changed. It has no figure though on how much Ireland will receive:

Ireland had argued for a change to the system of calculating which member states needed most recovery funds. The initial calculation was entirely based on past data, including economic growth and employment figures, meaning Ireland was due for a relatively small amount of €1.9 billion in recovery fund grants due to its strong performance in recent years

The other thing to note about the recovery fund is that it isn't a net contributor/net recipient thing, at least not directly. The €750 billion isn't coming directly from member states, but is instead being borrowed by the Commission. The plan is to repay it using EU-wide levies, such as plastic and carbon taxes. The Digital Tax is also being mooted.

Melanchthon · 21-07-2020 12:03PM

ancapailldorcha wrote: »

Is Ireland that badly affected though?

Source (I know there are non-EU countries but I think this is still valid):

https://www.statista.com/statistics/1104837/coronavirus-cases-europe-by-country/

This is going to be a defining moment for the EU one way or the other. I found it incredibly depressing when the northern "frugal four" were lobbying for loans instead of grants. It's exactly that sort of insular thinking that could lead to the eventual sundering of the project.

That's not population adjusted though so Poland with 40 something thousand cases looks worse than Ireland when in fact it's done much better.

ArmaniJeanss · 21-07-2020 12:56PM

Melanchthon wrote: »

That's not population adjusted though so Poland with 40 something thousand cases looks worse than Ireland when in fact it's done much better.

How do you fairly adjust for population though? I don't think the simple x per M population thing makes complete sense in this case.

e.g., if an earthquake on the Germany/Denmark border destroyed equal amounts of infrastructure on each side, then you'd expect that any rescue package would be 50/50, regardless of the disparity in overall population between the two countries. Or would it?

Harry Palmr · 21-07-2020 01:07PM

Italy 210bn
Spain 140bn
Greece 70bn
France 40bn

Obviously we'll take our share but "meh" to be honest. It'll cover the Covid social welfare payments for a few months.

thegetawaycar · 21-07-2020 01:19PM

ArmaniJeanss wrote: »

How do you fairly adjust for population though? I don't think the simple x per M population thing makes complete sense in this case.

e.g., if an earthquake on the Germany/Denmark border destroyed equal amounts of infrastructure on each side, then you'd expect that any rescue package would be 50/50, regardless of the disparity in overall population between the two countries. Or would it?

Infrastructure isn't measured against people, it will have a monetary value impact where as the virus is on a per person basis so it makes sense to base any relief on a cases per 100,000 basis. I'd say cases over deaths is a better way of evaluating.

moon2 · 21-07-2020 01:27PM

thegetawaycar wrote: »

Infrastructure isn't measured against people, it will have a monetary value impact where as the virus is on a per person basis so it makes sense to base any relief on a cases per 100,000 basis. I'd say cases over deaths is a better way of evaluating.

If the impact is on a per person basis, why would you include all the people who did not contract covid to determine how much a country should receive?

My own opinion is that raw case numbers and also cases per million are both poor metrics to determine how much a country has been affected.

A country of 10 million which shut down and had 3,000 cases is far worse affected economically than a similar country which had 6,000 cases and never shut down

Melanchthon · 21-07-2020 04:20PM

Harry Palmr wrote: »

Italy 210bn
Spain 140bn
Greece 70bn
France 40bn

Obviously we'll take our share but "meh" to be honest. It'll cover the Covid social welfare payments for a few months.

I think it's worse than "meh", talk is that Netherlands, Sweden, Austria, Denmark and Germany are going to get budget rebates even though they aren't doing worse out of the deal than Ireland*,

This is going to be followed by revenue raising in 2023 by recycling, financial and possibly digital revenue raising as well as higher taxes on imports from countries not meeting climate change target, these will negatively Ireland a country that's getting little from the deal and will be of benefit to Germany with its manufacturing and export based economic model even though Germany will be getting a deeper rebate.

* I haven't seen the Irish figure yet though since RTE aren't reporting it I would believe for the minute it's not good as with the way they put a pro-EU slant on things if it was it would be being talked about.

johnnyskeleton · 21-07-2020 09:01PM

ancapailldorcha wrote: »

Is Ireland that badly affected though?

No, but maybe we are trying to build in some goodwill for when we need a post no-deal Brexit bailout!

This is going to be a defining moment for the EU one way or the other. I found it incredibly depressing when the northern "frugal four" were lobbying for loans instead of grants. It's exactly that sort of insular thinking that could lead to the eventual sundering of the project.

Since the grants would have to come from somewhere, my take on it is that there was a risk that money destined for Eastern Europe and other net beneficiaries would be redistributed back towards the centre by the covid grants. Which, in a sense, would benefit Netherlands etc.

But then again who knows? Maybe it was a principled approach, where they don't want the EU to have a sort of federal emergency fund like the US

Chips Lovell · 22-07-2020 07:04AM

Melanchthon wrote: »

This is going to be followed by revenue raising in 2023 by recycling, financial and possibly digital revenue raising as well as higher taxes on imports from countries not meeting climate change target, these will negatively Ireland a country that's getting little from the deal and will be of benefit to Germany with its manufacturing and export based economic model even though Germany will be getting a deeper rebate.

I don't know. For me the biggest outcome from the negotiations is the creation of a precedent for mutualised debt. And while the likes of Mark Rutte will insist that this is a one-off, we all know that once you do it once, it smooths the path for a repeat. That and the prospect of pan-European taxes means we're moving a little further down the road to fiscal integration.

I think the Digital Sales Tax will probably be a stretch and I'd say our government will veto it for one. But the environmentally linked taxes could be a runner. And I don't think they will be to the benefit of Germany, which has a bit of a coal burning problem that is going to be difficult to solve since it has an indigenous mining industry located in a politically combustible region.

Melanchthon · 22-07-2020 07:38AM

https://www.irishtimes.com/news/politics/ireland-to-get-1-3bn-for-covid-19-response-from-eu-deal-1.4310280

Seems to be even less than what was talked about before and correct me if I am wrong but I thought there was already EU Brexit funding promised so that was a seperate thing.
Seems like a terrible deal for Ireland.

ancapailldorcha · 22-07-2020 08:28AM

Mod: Off topic posts (Lisbon treaty and MMT stuff) deleted.

ancapailldorcha · 22-07-2020 08:31AM

johnnyskeleton wrote: »

No, but maybe we are trying to build in some goodwill for when we need a post no-deal Brexit bailout!

That makes sense.

johnnyskeleton wrote: »

Since the grants would have to come from somewhere, my take on it is that there was a risk that money destined for Eastern Europe and other net beneficiaries would be redistributed back towards the centre by the covid grants. Which, in a sense, would benefit Netherlands etc.

But then again who knows? Maybe it was a principled approach, where they don't want the EU to have a sort of federal emergency fund like the US

I'm inclined to think that they dislike the idea of spending money on countries that they see as feckless. It's not markedly different from the attitude some people have towards those who claim welfare though of course scepticism about how these pan-EU grants are divided is important so long as it does not descend into mere cynicism.

Melanchthon · 22-07-2020 11:26AM

ancapailldorcha wrote: »

That makes sense.

I'm inclined to think that they dislike the idea of spending money on countries that they see as feckless. It's not markedly different from the attitude some people have towards those who claim welfare though of course scepticism about how these pan-EU grants are divided is important so long as it does not descend into mere cynicism.

Cynicism is the right attitude though, it's only applied to the Eastern European states but Spain is literally giving away more in Coronavirus aid to non-EU countries than Ireland will receive despite Spain apparently being in such a bad way that not striking this deal would have threatened the EU as a whole.

https://www.translatetheweb.com/?ref=TVert&from=&to=en&a=https%3A%2F%2Fm.europapress.es%2Fnacional%2Fnoticia-gobierno-impulsa-plan-cooperacion-1700-millones-ayudar-paises-afectados-coronavirus-20200721160604.html

In short this deal is terrible for Ireland.

Wanderer78 · 22-07-2020 11:28AM

its very concerning that our political system hasnt realised we have the ability to create our own limited supply of funding for some of our needs, causing us to default to external institutions to do so

MrMusician18 · 22-07-2020 11:41AM

johnnyskeleton wrote: »

No, but maybe we are trying to build in some goodwill for when we need a post no-deal Brexit bailout!

Since the grants would have to come from somewhere, my take on it is that there was a risk that money destined for Eastern Europe and other net beneficiaries would be redistributed back towards the centre by the covid grants. Which, in a sense, would benefit Netherlands etc.

But then again who knows? Maybe it was a principled approach, where they don't want the EU to have a sort of federal emergency fund like the US

The 5bn Brexit bailout fund is included in the budget, so it's likely Ireland will receive half of this fund and the rest distributed among the other nations.

On the recovery fund as a whole, I don't actually mind that we will be net contributors to it. It will add €15bn to our national expenditure which will cost us some €375m per year to finance in interest. What is somewhat galling though is that when the big nation's come looking with the paw out a way is found to provide grants, mutialise debt and provide low interest loans. Our reward though was a punitive 6% interest rate when we needed support, remember the clap trap about "moral hazard"?

The Union would do well to remember that solidarity is always expected for everyone, equally. Not just big member states with rising eurosceptic populist movements.

Scuid Mhór · 22-07-2020 11:48AM

Melanchthon wrote: »

Cynicism is the right attitude though, it's only applied to the Eastern European states but Spain is literally giving away more in Coronavirus aid to non-EU countries than Ireland will receive despite Spain apparently being in such a bad way that not striking this deal would have threatened the EU as a whole.

https://www.translatetheweb.com/?ref=TVert&from=&to=en&a=https%3A%2F%2Fm.europapress.es%2Fnacional%2Fnoticia-gobierno-impulsa-plan-cooperacion-1700-millones-ayudar-paises-afectados-coronavirus-20200721160604.html

In short this deal is terrible for Ireland.

Wasn't it estimated that the COVID emergency payments would amount to six billion euro? 1.3 billion euro, to me, sounds like a negligible amount given what Ireland is up against on a per capita basis and the destructive economic impact the virus has had and will continue to have. I am very in favour of the EU, especially as we hurtle towards a multipolar world of international relations, and I am by no means a eurosceptic, but what's the point of ceding some level of sovereignty to a Union to that is clearly edging towards fiscal harmonisation if we just get left by the wayside?

Chips Lovell · 22-07-2020 11:51AM

I think the idea behind the COVID-19 relief fund is not meet all of the costs a state faces in dealing with the crisis, but to defray some of the costs.

Scuid Mhór · 22-07-2020 12:04PM

Chips Lovell wrote: »

I think the idea behind the COVID-19 relief fund is not meet all of the costs a state faces in dealing with the crisis, but to defray some of the costs.

Sure -- but at the same time it would cost a lot less money to help Ireland substantially than it would cost to improve other countries by the same amount, just based on the size of our population and infrastructure. It's not proportionate is what I'm saying.

bossdrum · 22-07-2020 12:37PM

Obese Child wrote: »

SNIP. Serious posts only please.

I'm afraid you've pick it up wrong, you'll be the one writing the cheque.:D

The silence in the media about this is extraordinary. Ireland is being hammered with this deal.

Wanderer78 · 22-07-2020 12:39PM

bossdrum wrote: »

I'm afraid you've pick it up wrong, you'll be the one writing the cheque.:D

The silence in the media about this is extraordinary. Ireland is being hammered with this deal.

my gut is telling me the same

Chips Lovell · 22-07-2020 12:49PM

Scuid Mhór wrote: »

Sure -- but at the same time it would cost a lot less money to help Ireland substantially than it would cost to improve other countries by the same amount, just based on the size of our population and infrastructure. It's not proportionate is what I'm saying.

I'm not sure if I'm following this? Surely helping Ireland more substantially than others because we're a small country is disproportionate rather than proportionate?

MrMusician18 · 22-07-2020 12:57PM

bossdrum wrote: »

I'm afraid you've pick it up wrong, you'll be the one writing the cheque.:D

The silence in the media about this is extraordinary. Ireland is being hammered with this deal.

That's a bit of an exaggeration to be fair. Yeah, it's not a great deal but it's not terrible either. I'm sure Ireland could've pushed harder on some aspects but Ireland would've found itself isolated then, and friendless when it's true strategic interests were threatened. You have to pick your battles.

For such a monumental jump for the EU, there's been very little analysis of any depth in the Irish media however.
There are many articles saying the same thing. Says more about the quality of Irish journalism than any conspiracy imo.

Chips Lovell · 22-07-2020 01:00PM

MrMusician18 wrote: »

For such a monumental jump for the EU, there's been very little analysis of any depth in the Irish media however

Really? I've been reading loads. In the first twelve hours or so, there wasn't much detail available but presumably that's because it takes a bit of time to pick through what I'm sure is a pretty lengthy and complex agreement.

Deal! EU reaches agreement on budget and COVID-19 stimulus fund

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