Where do we stand on the process of EU help? ESM Covid lines are still available, but we still think political stigma makes them unattractive for both Italy and Spain. So while headlines might keep popping up, our base case remains that countries will wait until 2021 Next Generation EU resources to become available. The EU’s SURE programme, providing loans to help finance short-time work (even retrospectively), meanwhile, is in high demand. €81 Bn (of €100 Bn in total) have, in theory, been allocated across countries already (Italy and Spain get €27 Bn and €21 Bn, respectively), pending implementation, creating abridge into 2021.
The recovery fund “Next Generation EU” was the big deal this summer. But more complicated news may be next. Technical details and national approval processes are not completed and could be the source of less reassuring headlines. The EU parliament is already making noise. As 2021 draws closer, it may also become more blatant that NGEU’s power lies with symbolism rather than its economics- that was our read from the start. Resources of €750 Bn (5.6% of GDP) are too little if spread over six years. They might not be used in full (grants seem more appealing than loans), and governments could preferto fund already planned expenditure via NGEU, rather than increase stimulus.
Germany flagged that its first €20 Bn tranche of grants will be used to fund already planned measures, leaving total stimulus unchanged (and Bund supply may be even lower). National recovery and resilience plans for NGEU could trickle in with 2021 budgets in the fall, providing more insight into other countries’ use of EU support.
