It took a shocking world tragedy. It took the deepest recession since WWII. It took the prospect of a downward spiral destroying many viable companies and jobs, fragmenting the European Single Market, and shaking the foundations of the European integration. At the dawn of 21st July, after the second longest meeting of its history (the meeting in Nice in December 2000 to prepare the enlargement still being the longest) the European Council with its 27 heads of states and governments was able define a new algorithm for European solidarity to cope with common systemic threats and to pave the way for a long-term transformation.

After a long and complex debate involving all European and national political institutions, this new algorithm for European solidarity was forged with the following features:

– a Recovery Fund is swiftly created to respond to the COVID crisis

– its size, 750 billion Euros almost doubles the current EU budgetary capacity and it wants to be robust enough to counter the first wave of the recession, taking also into account the energic reaction from the ECB

– this Fund will operate through the EU budgetary institutional framework giving the necessary guarantees of monitoring and accountability

– this Fund should also be consistent with the long-term priorities already defined by the European institutions: implementing the Sustainable Development Goals, the European Green Deal and the European Pillar of Social Rights

– Being part of the European budgetary capacity, this Fund can disburse loans or grants, providing a conditional re-distribution to support the most affected regions, social groups, and countries

– this Fund will be financed by an EU instrument managed by the European Commission which will borrow in the markets benefiting from the high rating of the European Union and managing a European deficit to be absorbed in the long term. Hence, an embryo of a European treasury.

– this common issuance of European debt will be backed by the raising the ceiling of EU own resources and raising new ones not charging citizens but taxing those who are not: pollution with plastics, border carbon tax or ETM taxation; a digital tax and, possibly, a financial transaction tax.

We can be sure that this time, European history is being made.”

Hence, we are very far away from the algorithm of European solidarity invented 10 years ago during the Eurozone crisis: correcting countries behaviour by using the violence of speculative financial markets betting against their debt to force them to adopt structural reforms reducing wages, pensions, education, and social protection. At the same time, with the European Stability Mechanism, to give them the minimum financial support which was necessary to keep them afloat. As this recipe brought a double-dip recession to the Europe Union and triggered anti-European reactions in many countries, it seems the lesson was learnt do not come back again with the austerity recipe!

A new instrument of European sovereignty is being invented to enable Europe to better shape and project its future.”

Hence, we are very far away from the algorithm of European solidarity invented 10 years ago during the Eurozone crisis: correcting countries behaviour by using the violence of speculative financial markets betting against their debt to force them to adopt structural reforms reducing wages, pensions, education, and social protection. At the same time, with the European Stability Mechanism, to give them the minimum financial support which was necessary to keep them afloat. As this recipe brought a double-dip recession to the Europe Union and triggered anti-European reactions in many countries, it seems the lesson was learnt do not come back again with the austerity recipe!

Still, there are no perfect agreements. Several shortcomings and inconsistencies remain:

– the compliance of Member States with the rule of law to benefit from EU funds remains quite ambitious and flawed

– the principle of rebates for the net contributors remained to provide them with a compensation but the blurs the budgetary consistency

– several Community programmes, crucial for the future of the EU, suffered severe cuts: Horizon, Erasmus, Digital, Child Guarantee, Heath, EU Invest, Just Transition mechanisms, something which will face the justified reaction by the European Parliament using its co-decision competences.

– the higher ceiling of own resources still needs confirmation by national parliaments and will certainly be asserted by the European Parliament to give its consent to all this new budgetary effort. New own resources are an indispensable condition to have a European budgetary capacity with the necessary ambition.

So, many new developments will still be at stake for this new algorithm to become a reality. But we can be sure that this time, European history is being made. A new instrument of European sovereignty is being invented to enable Europe to better shape and project its future.

Credit Photo: European Union