Saturday

26th Sep 2020

Opinion

Spanish vs Dutch views on the EU Recovery Fund

  • Dutch PM Mark Rutte. 'In the Netherlands, there is work to be done: loopholes for corporate tax evasion must be plugged, self-employed workers must be better protected, the large current account surplus must be addressed' (Photo: Council of the European Union)

The Netherlands and Spain are at opposite ends of the debate about the EU's recovery package. But they must realise they are in the same boat.

The Covid-19 pandemic has triggered an unprecedented recession in Europe which has hit the EU at a delicate moment. It could be the toughest test for European integration yet. A strong, fast and coordinated, response is essential.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Spanish PM Pedro Sanchez. 'In the case of Spain, there is a widespread agreement on the need to reform the education system; the labour market; its fiscal framework; public administration; and social policy' (Photo: Council of the European Union)

In March, the EU initially acted in an uncoordinated way. Since then, several EU institutions have taken fast and bold steps.

The European Central Bank has deployed an unprecedented asset-purchase programme, the European Commission has for the first time ever lifted restrictions on fiscal expansion and state aid, and the Eurogroup agreed new European Stability Mechanism credit lines, emergency measures to support those unemployed, and new funds for the European Investment Bank. Now it is time for the heads of state and government to rise to the challenge.

A speedy economic recovery will help avoid a long, drawn-out social, economic and political crisis.

Moreover, this crisis is an opportunity to put the European economy on a trajectory to meet the digital and green challenges of the 21st century. It is also a test of EU solidarity.

In a world increasingly shaped by Sino-American geopolitical and economic competition, no European state can afford to stand alone. Today's complex geopolitical landscape makes a united Europe even more necessary.

The current crisis is like a meteorite that has come crashing from the sky. It is the fault of no EU government and dealing with the fallout requires cooperation.

Dutch election

The internal market, the monetary union and the Schengen travel zone are at risk, and populist anti-EU voices stand ready to exploit disagreements that have emerged among member-states.

A piece of unfinished business is the so-called EU Recovery Fund.

It is based on a Commission proposal, and is integrated into the EU's draft seven-year budget. It would allow for investment in the EU of almost two trillion euros, some of it in the form of debt issued by the Commission.

The sooner a deal is reached, the quicker the money can be released and the faster the recovery will be.

Upcoming elections in countries like the Netherlands- where the government holds a tiny majority - also mean that the longer it takes to reach a deal, the more its parliament will be in election mode, making passage of a deal more difficult.

There is a window to reach an agreement this month.

The Netherlands and Spain think differently about a number of elements in the recovery package.

Dutch concerns about the need for conditionality are well-rehearsed, but so is the notion that the Netherlands is one of the largest beneficiaries of a strong single market.

Likewise, Spain knows a blank-cheque from the North is politically and morally indefensible. So any deal must strike a balance between funding and conditions; between reforms and solidarity.

On this the two countries agree. As they do on the need for a digital, inclusive and green recovery.

If well-designed, the Recovery Plan could also help forge a more geopolitical Europe, and increase Europe's strategic autonomy by investing in new technologies, strengthening the international role of the euro, and reducing dependencies while avoiding the trappings of protectionism.

To achieve these goals, the Recovery Plan needs to be sufficiently large to ensure that the recovery does not increase economic divergence inside the Union.

Large differences in the amount of state aid given by member-states has the potential to unlevel the playing field inside the EU .

Subsidise - but scrutinise

A substantial part of the plan should, therefore come in the form of subsidies. This level of solidarity is also necessary to avoid dangerous increases in the public debt of member states that might trigger a new eurozone crisis.

In exchange, there is a broad understanding that the plan must incorporate an adequate EU-level monitoring mechanism to ensure that funds are spent appropriately and that there is enough accountability.

Solidarity also means acknowledging that every country must reform.

The country specific recommendations that the European Commission publishes in its European Semester reports are a good place to start.

In the case of Spain, there is a widespread agreement on the need to reform the education system; the labour market; its fiscal framework; public administration; and social policy.

Spaniards know that these reforms are due, just as they knew a structural transformation of the economy was necessary when the country joined the EU more than thirty years ago.

In the Netherlands, there is also work to be done: loopholes for corporate tax evasion must be plugged, self-employed workers must be better protected, and its large current account surplus must be addressed.

During the previous crisis Europeans learnt the hard way that domestic ownership of national reforms is crucial to boost for their long-term success.

By contrast, rules perceived as being imposed from the outside might spark anti-EU sentiment.

Giving other governments or their parliaments a veto over how recovery funds are spent, would be a recipe for acrimony and failure.

Instead, the European Commission, with its deep technical knowledge of each member state's economies, is the best-suited institution to monitor reform implementation, yet its monitoring capacity and its enforcement role should be improved.

Another EU-level institution that should play a role is the European Parliament. The joint issuance of debt requires joint democratic control of how this debt is spent and repaid.

Of course, national parliaments have a role to scrutinise these plans, but so does the European Parliament. It should have a say both on the general guidelines of the plan and in the monitoring of the good use of the funds.

Spain and the Netherlands – the fourth and fifth economies in the EU– ultimately have a shared responsibility to make this work.

Author bio

Monika Sie Dhian Ho is general director of the Clingendael Institute in The Hague and Charles Powell is the director of the Elcano Royal Institute in Madrid. This piece was co-written by Rem Korteweg, senior research fellow at the Clingendael Institute, and Federido Steinberg and Miguel Otero-Iglesias, senior analysts at Elcano.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Michel lays out compromise budget plan for summit

Ahead of expected tense discussions next weekend among EU leaders, European Council president Charles Michel tries to find common ground: the recovery package's size, and grants, would stay - but controls would be tougher.

Agenda

Budget talks shift gear This WEEK

European Council president Charles Michel is expected to present his compromise proposal on the EU's long-term budget and the recovery fund to national capitals in the second half of the week.

Why no EU progress on Black Lives Matter?

Months after Black Lives Matter erupted, for many EU decision-makers the problems of racism in policing and criminal legal systems - the issues that sparked the George Floyd protests - are still 'over there', across the Atlantic.

How EU can help end Uighur forced labour

A recent report noted apparel and footwear as the leading exports from the Uighur region - with a combined value of $6.3bn [€5.3bn] representing over 35 percent of total exports.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  2. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  3. UNESDAReducing packaging waste – a huge opportunity for circularity
  4. Nordic Council of MinistersCOVID-19 halts the 72nd Session of the Nordic Council in Iceland
  5. Nordic Council of MinistersCivil society a key player in integration
  6. UNESDANext generation Europe should be green and circular

Latest News

  1. Berlin repeats support for EU human rights sanctions
  2. China's carbon pledge at UN sends 'clear message' to US
  3. Far right using pandemic to win friends in Germany
  4. Visegrad countries immediately push back on new migration pact
  5. Why no EU progress on Black Lives Matter?
  6. EU migration pact to deter asylum
  7. 'Era of EU naivety ends', MEP pledges on foreign meddling
  8. Anti-mask protesters pose challenge for EU authorities

Stakeholders' Highlights

  1. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  2. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  3. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  4. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  5. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  6. UNESDACircularity works, let’s all give it a chance

Join EUobserver

Support quality EU news

Join us