Apart from decisive European Central Bank measures, the EU-wide response to the COVID crisis had been rather weak until the Commission put on the table a drastically new proposal: the creation of a new recovery facility, ‘Next Generation EU’, that would borrow money in the name of the EU to finance EU-wide expenditures. The changes to the proposed standard seven-year budget that primarily focuses on long-term structural issues are however generally small, and funding reductions are compensated by new funds from the recovery instrument, suggesting that an opportunity is missed to reform the EU budget.
Four guiding principles can help ensure a well designed EU equity fund.
The announcement of a large stimulus without a growth target indicates that China’s recovery is far from complete.
The new EU instrument to mitigate unemployment risks during an emergency (SURE) is too modest to have a significant impact the COVID-19 crisis beyond being a first step in the overall recovery plan.
COVID-19 has triggered a severe recession and policymakers in European Union countries are providing generous, largely indiscriminate, support to companies. As the recession gets deeper, a more comprehensive strategy is needed. This should be based on four principles: viability of supported entities, fairness, achieving societal goals, and giving society a share in future profits. The effort should be structured around equity and recovery funds with borrowing at EU level.
It’s time for the EU to make quick and indispensable progress in forming a capital markets union.