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Not before the end of July and diluted: the bets on the EU Fund agreement


The EU Heads of State and Government continue to meet in Brussels to negotiate the Recovery Fund Of the 750,000 million that is going to be launched to face the crisis caused by the Covid-19 pandemic, but the hopes that they will reach an agreement at this summit are dwindling. In fact, the European leaders themselves have questioned what will happen … at least on this date. The stakes are clear: There will be an agreement, although it will not arrive before the end of July, and the plan will be very diluted with respect to its current form., which will not take over Pedro Sánchez's aspirations.

Those are the most repeated predictions in recent days by experts. For example, at Danske Bank they are blunt about it: "We are not confident that an agreement will be reached this weekend, but we hope that it will be reached before the European Commission begins its summer holidays in August."

Point of view with which the experts from Rabobank agree, who see "it is unlikely that the necessary unanimity of support for this Fund will be quickly achieved and that the probability of progress at the summit is low". Furthermore, they point out that "regardless of the speed of an agreement, we believe that the odds are clearly tilted in favor of the plan being approved is noticeably diluted compared to its current shape"

It should be remembered that the Twenty-seven are studying the creation of a Recovery Fund for 750,000 million that will be divided into non-refundable aid (500,000 million) and in the form of loans (250,000 million). That is the proposal that is currently on the table, although it could vary substantially due to the opposition of some countries, which believe that the amount of money that should be distributed in the form of loans should increase, which will then have to be returned. They are called 'frugal' countries (Netherlands, Austria, Sweden and Denmark), which are the most 'buts' are putting.

"There are still obstacles to overcome for the Recovery Fund to come to fruition, as has been revealed in the bilateral meetings that the presidents of different countries have been holding," Renta 4 experts say, referring to the mini-tour that the Spanish Prime Minister has carried out this week to try to bring positions closer to the Netherlands or Sweden, without much success.

The pitfalls that these analysts talk about are that of having to get the unanimous support from the 27 member states and the European Parliament to the plan, and the opposition exercised by the four 'frugal', who "will try to impose clear limits on aid, mainly that they are short-term loans and entail a strict conditionalityIn other words, they are granted in exchange for a commitment to carry out deep structural reforms.

"Nor should we forget that the countries that will be net contributors, fundamentally those of Northern Europe, are also affected by Covid-19, which could make it difficult for them to agree to be in solidarity with those of the South. We will see how much to give Regarding the initial proposal to obtain its approval, "remarks Renta 4. Although, in the end, and regardless of the distribution of the Fund, Spain could come out reinforced.


For their part, experts at Bank of America, who point out that the agreement on the Fund "may have to wait until the end of July or until the end of the summer", are very concerned that there is "excess conditionality and / or or strict governance, "because that would the Recovery Fund "looks like a troika-style program".

And in Scope Ratings, meanwhile, they bet that some of the characteristics of the Fund will change "in the coming weeks." Specifically, they point out that it is possible to see modifications in the final proportion of funds between grants and loans, in the eligibility criteria to access the Fund, in the purposes / projects for which the money can be used ultimately, and also in when it comes to funding sources, "potentially including new taxes at European level related to the environment and digitization. "

"The bottom line – which may not yet be presented at this summit – will change a bit compared to the current proposal. Still, overall direction, including the proposal to use substantial subsidies under the European Commission proposal, is likely. , form part of the strategy of economic recovery of the EU in the future ", conclude the analysts of this firm.

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