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Closed bar in Madrid: Spain has 140 billion euros in special funds
Photo: Marcos del Mazo / LightRocket via Getty Images
Having a lot of money to spare can be a huge burden.
Italy is experiencing it right now.
The heavily indebted euro state, additionally shaken by the pandemic, is in a government crisis - because the Roman coalition cannot agree on what to spend all the billions Italy has from the Corona reconstruction fund on.
There are considerable sums involved.
Italy is to receive more than 200 billion euros from the Corona special fund in the coming years.
Rome can access 65 billion euros in non-repayable grants alone.
In addition, there are repayable loans from Brussels coffers and of course the usual funds from the regular EU budget.
To the author
Photo:
Institute for Journalism, TU Dortmund
Henrik Müller
is professor for economic journalism at the Technical University of Dortmund.
Before that, the graduate economist worked as deputy editor-in-chief of manager magazin.
In addition, Müller is the author of numerous books on economic and monetary issues.
Every week he gives a pointed outlook on the most important economic events of the week for SPIEGEL.
Spain can count on a similar additional budget.
The country is entitled to 140 billion euros in special funds in the coming years, 59 billion euros of which will be real grants.
After Italy, Spain is the second largest recipient of funds from the Corona pot, known in Brussels jargon as the "development and resilience facility".
But it is questionable whether the funds will actually flow in good time to prevent the EU from drifting further apart.
The big southern states of Italy and Spain, which are particularly hard hit by Covid-19 and the subsequent economic collapse, are slow to withdraw funds from Brussels' coffers, as the European Court of Auditors has repeatedly criticized.
Big questions are at stake: will Europe stick together in the long term - or will the EU and Eurozone break up into a prosperous northern and a starving southern part?
Will the 750 billion euro fund, which the EU member states and parliament agreed on last year after tough struggle to cushion the consequences of the pandemic, be a historic success - or will the ambitious major project turn out to be an expensive flop?
All of this depends not least on whether the committed funds can be turned into successful projects where they are needed most.
And that means: Italy and Spain, the two largest recipient countries of the fund, which together account for around a quarter of the economic output of the euro zone, have a special responsibility.
"Corruption, Fraud, Money Laundering"
Time is running out.
The disbursement of the funds is to begin this summer.
As early as
Monday
and
Tuesday
, the finance ministers of the EU countries want to bow to the "national development and resilience plans".
Governments should set out which reforms and investment projects they want to initiate by 2026.
Only when these plans have been approved by the EU institutions and national parliaments can money actually flow - and help push the economic recovery.
It won't be a sure-fire success.
As early as December, the Council of the EU urged the member states to be more speedy and careful.
In particular, those countries that are »lagging behind« in terms of »effective and efficient use of EU funds« would have to make an effort: They should limit the administrative burden and prevent »misuse of funds (eg corruption, fraud and money laundering)«.
Who was meant in the first place is obvious.
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Restaurant in Rome during the New Year's lockdown: Italy is to receive more than 200 billion euros from the Corona special fund in the coming years
Photo: GIUSEPPE LAMI / EPA-EFE / Shutterstock
Italy's government, which has just lost its majority after ex-Prime Minister Matteo Renzi's party left, wants to use the Corona Fund money to make the country “greener” and “smarter”.
Spain's Minister of Economic Affairs, Nadia Calviño, recently announced that her country would of course invest the entire amount available quickly.
In reality, however, both countries have had administrative problems calling for EU funds for years.
Of the sums the country is entitled to under the structural and investment funds of the previous EU budget from 2014 to 2020, the government in Madrid had spent only 35 percent by summer 2020.
In Italy, the “absorption rate” (EU-speaking) was just 39 percent.
After all: by the middle of last year both countries had approved projects in the planning stage with which they can call up 80 percent of the funds available.
(Payouts can be postponed for up to three years after the end of a budget).
Incidentally, Germany's performance when it comes to spending EU money is also not great (absorption rate: 54 percent, as of June 30, 2020) - significantly slower than Finland's (77 percent).
Positive example of Greece
While the curse of slowness has only appeared in Spain in recent years, Italy's problems with funding are notorious.
In the penultimate seven-year EU budget, seven percent of the funds that were earmarked for the country from the structural and cohesion funds were forfeited - because the authorities simply did not succeed in getting a sufficient number of projects approved on time, as the industrial countries club OECD has stated.
How things can go differently can be seen in Greece of all places.
Because the national administration was overwhelmed, the EU Commission has given the country a lot of support since 2015.
Not only with money, but also with active support - "hands-on" on site.
Commission teams helped with planning and applying for projects, designing reform projects and much more.
The result is pretty impressive: Greece is now one of the countries with the highest success rates in obtaining EU funds.
Without this money, it would have been virtually impossible for the bankrupt country to finance public investments.
The price, however, is a creeping disempowerment of the nation state.
It is hard to imagine that Italy or Spain would get involved.
And: If the example catches on, this would be tantamount to European centralization through the back door - for many in northern Europe this would finally cross a red line.
Go with the economy!
In the past it was problematic when member states took their time to absorb funds from the regular EU budget.
But at least the goals for which Brussels money is typically spent are of a long-term nature: It is about improving - or maintaining - economic structures, not about acute crisis management.
Now the EU is trying for the first time to operate a significant amount of financial policy economic management: The wounds of the corona crisis, the deepest economic slump in generations, which have affected the EU and the euro zone to varying degrees, are to heal.
Timing is all the more important: The funds have to be spent quickly, otherwise they cannot develop their desired crisis-relieving effect.
For this, however, it is necessary that the programs applied for correspond to the long-term goals that the member states, parliament and the Commission have agreed on: together, more than half of the money from the Corona pot should flow into topics such as climate change and digitization.
Getting all of these short and long-term goals under one roof is a complex undertaking.
Sure, the EU is a large entity with 450 million inhabitants, 27 member countries and complex structures, whose competencies partly overlap.
Under these conditions it is almost impossible to pursue a coordinated, rapidly reactive economic policy.
The more responsibility rests on the individual states.
Icon: The mirror
The most important business dates of the week ahead
Monday Up Arrow Down Arrow
Brussels -
Inventory
I
- The euro finance ministers connect for a video meeting.
On the agenda are the "national development and resilience plans" for the Corona reconstruction fund and the imbalances that have worsened due to the different levels of impact of the member states as a result of the pandemic within the euro zone.
Beijing -
First super spreader, then world champion
- China's statistical office announces economic growth for 2020.
The People's Republic, from which the corona pandemic started, was the only large economic area that grew last year.
Düsseldorf / Stuttgart / Hamburg / Frankfurt -
more wages
- start of the second round of collective bargaining in the metal and electrical industry in North Rhine-Westphalia, Baden-Württemberg and the north
Tuesday Up Arrow Down Arrow
Brussels -
Inventory II
- The finance ministers of all 27 EU countries discuss the economic policy priorities and the "national development and resilience plans".
Geneva -
In view: the next crises
- The World Economic Forum (Davos) presents its world risk report.
Reporting Season I
- Financials from Alstom, Halliburton, Bank of America, Goldman Sachs, State Street, Netflix.
Wednesday Up Arrow Down Arrow
Washington -
Operation Restart
- Inauguration of the new US President Joe Biden.
Berlin -
Farmer Show
- Start of the International Green Week, this time only online.
Luxembourg -
Very low, still
- The statistics agency Eurostat publishes key figures on inflation in Europe.
Because of the recession, the measured values are very low.
However, warnings about a rise in inflation as the post-pandemic recovery continues to grow louder.
Reporting Season II
- Financials from Richemont, Burberry, Procter & Gamble, US Bancorp, Bank of New York Mellon, Morgan Stanley, Alcoa.
Thursday Up Arrow Down Arrow
Frankfurt -
stay on course
- ECB Council meeting.
After the central bank expanded its scope of action at the last meeting, no major changes in course are to be expected this time.
Brussels -
Open borders, increasing case numbers
- EU Corona summit: In order to coordinate the measures to combat the pandemic, the EU heads of state and government are meeting via video link.
Washington -
More pain than gain
initial jobless claims in the United States.
Reporting Season III
- Business Figures from IBM, Intel.
Friday Up Arrow Down Arrow
Reporting Season IV
- Business Figures from Remy Cointreau, Schlumberger.
