{"id":2432,"date":"2020-04-22T22:30:40","date_gmt":"2020-04-22T20:30:40","guid":{"rendered":"https:\/\/reclaimfinance.org\/site\/?p=2432"},"modified":"2023-03-03T16:37:11","modified_gmt":"2023-03-03T15:37:11","slug":"european-recovery-bonds-and-recovery-fund-yes-if-they-are-green-and-work-for-the-most-impacted","status":"publish","type":"post","link":"https:\/\/reclaimfinance.org\/site\/en\/2020\/04\/22\/european-recovery-bonds-and-recovery-fund-yes-if-they-are-green-and-work-for-the-most-impacted\/","title":{"rendered":"European \u201cRecovery Bonds\u201d and \u201cRecovery Fund\u201d? Yes, if they are green and work for the most impacted !"},"content":{"rendered":"

In an unexpected twist, German Chancellor <\/b>Angela Merkel<\/b><\/a> signaled her openness to consider the issuance of European joint debt. This switch, a few days before a videoconference between EU leaders on Thursday April 24th, makes \u201c<\/b>Recovery Bonds<\/b><\/a>\u201d and a \u201cEuropean Recovery Fund\u201d more and more likely options. <\/b><\/p>\n

These measures could be a real plus in building a strong and sustainable recovery, away from austerity\u2026 As long as they aim at financing the transition to a decarbonized economy – with a fossil fuel phase-out – while increasing solidarity. To build a desirable shared future, Recovery Bonds or Funds need to be green and work for the most vulnerable people and States.<\/b><\/p>\n

\u201cEurobonds\u201d are a recurring issue in European politics, emblematic of the imaginary divide between a South that spends lavishly and a tight-fisted North. But, facing what can only be a lasting economic <\/span>recession <\/span><\/a>of <\/span>historical proportions<\/span><\/a> and struggling to find between <\/span>1 and 1.5 trillion<\/span><\/a> euros, the epic divide could be bridged.<\/span><\/p>\n


\nCommon debt: where do the EU stand?<\/b><\/h3>\n

EU leaders are preparing to discuss how to finance the \u201cafter\u201d of the crisis. The political dynamics call for innovative and common European means to provide long-term financing, beyond and after EU and Member States\u2019 emergency responses. While an increased EU budget is likely, it alone won\u2019t be sufficient to meet current economic and social challenges. Other options need to be considered. <\/span><\/p>\n

Overall, nine countries, including France and Italy, support common debt issuance while Germany, the Netherlands, Finland and Denmark strongly oppose it. <\/span><\/p>\n

In this context, Merkel\u2019s recent statements could be a gesture of good faith toward the advocates of common debt. At the same time, <\/span>Valdis Dombrovskis<\/span><\/a> put forward an extra-budget fund that would come on top of the EU Budget. It would be financed by borrowing on the market. To avoid excessive debt, Spain is pushing for common debt fund based on grants. <\/span><\/p>\n

For these options, European Treaties do not have to be reformed (a move that Merkel would not allow). Article 122 of the Treaty on the Functioning of the EU already allows the Commission to create such solidarity mechanism in time of crisis. It has already been used for the European Stability Mechanism and the new \u201cSURE\u201d program. <\/span><\/p>\n


\nCommon debt: to what end?<\/b><\/h3>\n

First, we need to correctly assess for how long these measures will be in place. Unlike the emergency response that Member States, the EU and the ECB launched, today\u2019s choices are about the long term recovery. We are no longer talking about reducing the damages of the Covid storm, but about rebuilding the EU in its wake. <\/span><\/p>\n

The next EU Pluriannual Budget will cover budgets from 2021 to 2027. \u201cEurobonds\u201d or \u201cRecovery Bonds\u201d, with a fund like the ones from the French or Spanish proposals, would take between one and two years to set up. <\/span><\/p>\n

The question for these tools is not so much \u201chow fast can we act\u201d but rather \u201chow will we be able to sustain the financial cost of the recovery\u201d. This assessment leaves us with a choice to make. Since we are talking about the future of our societies and economies, what direction do we want them to take? <\/span><\/p>\n

The Covid and climate crisis have common roots – worldwide environmental deterioration – and many similarities: <\/span><\/p>\n