It was another tough wrestling match in Brussels. The positions were very far apart at the beginning of the negotiations and the climate in the negotiating room must have been rather undercooled. But at least there was the Franco-German proposal for a „reconstruction fund“ of 750 billion euros, which was intended to benefit the states particularly hard hit by the Corona crisis.
Particularly controversial was the allocation of the sum to grants or loans. Originally, 500 billion euros were to be disbursed as non-repayable grants and 250 billion euros as loans. The breakdown has now changed to 390 billion euros in grants and 360 billion euros in loans, after the „Thrifty 4“ (the Netherlands, Austria, Denmark and Sweden) insisted on a reduction in the grant amount. There are also conditions for the use of the aid payments, which are to be based on the economic policy recommendations of the EU Commission.
What is new is that the EU has the option of refinancing itself by borrowing on the capital market. Debt servicing for the new EU bonds will then be handled by the EU budget, which in future should also have its own tax revenues: From 2021 a tax on disposable plastics is to be introduced, and from 2023 a digital tax and a CO2 border tax are to be added. The border tax will be levied on imports from countries with less stringent climate protection requirements than the EU. This is intended to guarantee a level playing field for EU companies, especially as the EU is also planning to increase CO2 pollution prices. A Financial Transaction Tax has been in the pipeline for some time anyway.
With the Brussels decisions, the EU will become an independent player in fiscal policy for the first time. This change was long overdue, and not least the ECB will be relieved that it can now expect more support from Brussels in the fight against the crisis. Of course, this is also a step towards transfer union, but probably an unavoidable one. It is important, however, that the criteria for the use of funds are not just on paper. The EU as a whole must become more competitive, modern and innovative. The reconstruction programme can be an important step in this direction.