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#flashinfo, 25 june. European Economic Recovery Plan: a technical approach

On 25th of June, CCIFER organized a new edition of Matinal Digital, a meeting dedicated to a technical approach to the European Economic Recovery Plan.

Our guest speakers were:

• Dacian CIOLOS - Member of the European Parliament, Renew Europe Group
• Istvan JAKAB - Economic Adviser, Representation of the European Commission in Romania
• Francois COSTE- President of CCIFER
• Moderator: Florin LUCA - CEO, GAC Innovation East Europe

The meeting has started with an introduction made by CCIFER’s President, Francois Coste. He pointed out the fact that it is important to improve the competitiveness of Romania and to seek opportunities for the companies by making sure that the funding will be well absorbed at the national and local level ( 750 billion euro were proposed to be distributed in EU countries to relaunch the economy. Romania might receive this summer an addition of approximative 31 billion).

Main ideas :

• The structure of the European Economic Recovery Plan and the beneficiaries

• Dacian Ciolos pointed out that April started with a resolution in the European Parliament, (based on the experience at the last crisis, when EU didn't react timely enough). The European Commission was asked to come with a plan of recovery for all the economy, because the effects of this crisis are touching all the sectors. We still don’t know what the impact of this crisis will be, but EU cannot wait for a reaction next wear. They asked for a very quick recovery plan from de Commission and a quick multi annual financial framework, in order to give predictability to the business environment. Later, in May, the Parliament is to came with some proposals.
• The first reaction was to help governments to keep jobs and avoid bankruptcy of healthy companies in normal situation. But we needed more – to relaunch the economy: a program to modernize EU economy, having 2 main pillars of the EU commission for the next 5 years – Green Deal and Digital Transformation. We must invest money in order to recover, but also modernize EU economy based on Green Deal and Digital Transformation. The third one should be the resilience of the European community ( one of the first lessons learned in this crisis : if the Europe wants to develop trade, we have to be resilient and not depend on others in order to act very quick in crisis situation) .
• The Commission proposed an important package, 1.1 trillion multi annual budget for the next 7 years, to mobilize more a budget with 750 billion euros – an important effort for EU – an opportunity to reinforce the internal market. This was the argument of the Parliament for the states. All the countries are part of the internal market, with investment all around EU – if one part of the common market will be affected, all countries will be affected. So, we must have a common contribution to the recovery plan not only to recover national economies but rebuild and reinforce the EU common market and economy. Also, in industrialization and other sectors, this is the purpose of this package. We see a strong connection between MFF and recovery, even if we must analyze these two parts of the package separately – we will not accept in the Parliament to weaken the MFF.
• In order to reduce national contributions to this package, the European Parliament proposed one of the red lines – it will adopt it only with our own strong resources – this is the way to finance a part of the cost of this recovery, that should be reimbursed in the next years. That does not necessary mean new taxes for our citizens and economies – we can use our resources – companies who use EU market and do not pay taxes in the European Union.
• New own resources chapter and other conditionalities – we need the conditionality of the rule of law, EU is not a cash machine, but we put money with a set of values. The political group of Dacian Ciolos insists to have such a conditionality – the rule of law together with a budget – so a government that not respect the rule of law will not have direct access to money - ``"We propose not to punish the people of this countries – we will soon propose a solution to such a state with low rule of role so that the Commission would take the management temporarily of this fund, until the government will respect the rule of role.".
• It is a connection between the reform program and the resilience package of EU funds. It will be a connection between the EU semester and this investment. We need to invest this money in order to modernize these states. In Romania, we will have an electoral campaign and parliamentary elections – this recovery package and MFF is a real strong opportunity for Romania to modernize public administration, reform social policies, education etc. in order to create jobs.

• The funding distribution criteria proposed by the European Commission

• Istvan Jakab pointed out that it is a crisis of an unprecedented nature and it is very interesting from an economic point of view as well. Even though the shocks are similar, the effect on different countries are not similar. We are implementing a forecast to see exactly what the effect on the various countries will be. Some of the states first hit by the pandemic experience much harsher health and economy consequences. The Commission came with the proposal that Mr Ciolos summarized. If the problem is unprecedented, we must come up with solutions. This was the proposal with Next Generation EU – addition 759 billion euros to enforce the multi annual financial framework. This money will be borrowed by the Commission with very good interest rate. In will be directed to states in most need, to quick start de economic recovery.

• With this sense of modernizing – we keep the priorities of Green deal, Digitalization, and also to be sure our economies and societies will be more resilient in the future. There were discussions and it is a proposal of the Commission. There are discussions in the Council in the Parliament.

• Some of the funds had distribution criteria, like population, GDP per capita or average unemployment for a certain period. We can discuss around the criteria, but we think the figures presented in the media are reflecting the needs of the member states in the present context. This addition fire power of the Next Generation and MFF will give the EU the power of solidarity and responsibility to support all the member states and economies.
  • Regarding the European semester, the Next Generation Europe is a package composed of different components. The biggest one had plenty focus also in the Romanian media – recovery and resilience facility. Here will be grants and loans.  Romania will have 13.5 billion of grants. This is related indeed with the reforms and the investments the country will pursue in the European semester.
  • Regarding the European Semester – the former Romanian Government was agreed with the recommendation, but year after year, the progress was limited. The Commission changed a bit the process and it puts very much emphasis on the recovery – focus on healthcare, jobs, new jobs in order to recover the economy.
  • There are some things in which in different fields where this funding could be used very well in the following period. For example, for Romania is to improve tax collection, through digitalization, it would bring extra money to the budget. A recommendation should be in investment needs, infrastructure, competition, energy. The Government must come towards the Commission with a recovery and resilience plan.

• • It is important to agree on a couple priorities. For example, the Italian Prime Minister tried to do this immediately. In Romania’s case it would be very important to have an agreement and has this recovery and resilience plan in time.

The conclusions of Matinal Digital were presented by Florin Luca:

We still have strong disputes about the distribution criteria, the European common debt construction and also about the way on which this money will be spent. But a joint way of working to reach the consensus during this summer has already been established. And all the leaders of the EU countries agreed a common diagnosis: we have to come back rapidly with a strong answer to the current crises.

We will need:

• to have a clear vision about our future, a clear long term oriented message to address to the European Union and also to the world, with a strong state commitment;
• give a rapid and clear message to the population, economic players and markets;
• stimulate the internal consumption by reducing for a short period of time the VAT and influence the population behaviors;
• support the investments by credit, state grants and guarantees, rapid depreciation of the assets and even, to be a little bit technical, loss-carry back system;
• to be inspired by Keynes and launch genuine national programs in education, health and infrastructure as it has been done in all the western European countries when they had to relaunch their economy;
• focus on the industries with high capacity to integrate the chain value;
• to accelerate the euro zone integration.

These projects must be supported by institutional state initiatives for business development.