European Union economic recovery finance

In this article published by the Real Instituto Elcano, Enrique Feás explains the Economic Recovery Plan proposed by the European Commission last 27 May. The proposal aims to provide a fiscal stimulus package to the EU, to initiate the economic recovery at the Eurozone once the pandemic is over.

The author very much welcomes the Commission's proposal, not only because it is a step forward in the process of European integration, but also because it can be "a great opportunity to undertake a real structural transformation of countries like Spain".

The article details the figures and financial instruments of the “Economic Recovery Plan” which is pending on discussion and approval by the European Council in the coming months, and which it is consisting of two fundamental parts: 

1. A reinforced budgetary framework using traditional resources (raising the EU budget to EUR 1.1 trillion within a 7-year financial plan with long-term priorities) 
2. An extraordinary temporary boost financed with long-term debt: "Next Generation EU Plan" incorporated into the budget as a reinforcement of EUR 750 billion with the specific objective of economic recovery highly focused on financing structural reforms and green and digital transition projects and also, to a lesser extent, and on increasing strategic autonomy in technology and health.

This second line would be financed by issuing an extraordinary 30-year debt and possibly by issuing new European resources, such as a digital tax or a carbon tax. 

According to the author, another important change in the use of these funds will be their distribution, which would not be based on ordinary criteria, but considering how deep Member States have been hit by covid-19 crisis.