A certainty and some unknowns from the EU Council

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For our country, the highly anticipated European Council on Thursday 23 April ended with a great certainty and some serious questions. The first is that after all the Italian industrial-financial deterrent seems to be working.

This is demonstrated by the words addressed to the Berlin parliament by Germany’s chancellor Angela Merkel on the eve of the summit (the EU budget must be significantly enlarged to face the crisis from COVID-19), as well as what comes from yesterday evening’s summit.

In fact, the big news is that the Federal Republic is ready to commit part of its wealth to help the European economies in difficulty. Starting with Italy, whose powerful manufacturing capacity combined with the risk of a bankruptcy capable of blowing up the euro and the continental banking system have led the German government to make a decision that was previously unthinkable. Helping Rome and the other members of the ‘Mediterranean front of redistribution’ is necessary because without them the German industry is basically stuck. Berlin’s foreign trade is addressed for two thirds to European customers and the growth of national wealth is based on it.

At the same time, action appears increasingly urgent as the latest forecasts speak of a collapse of 15% of the EU’s GDP in 2020, as well as finally possible if it is true that the vast majority of Germans support aids to Europe. Moreover, for Germany this is a development perfectly in line with the strategic imperative of attaching itself to as many markets as possible, in order to support the national economy.

Certainly for Italy it will not be a blank check, nor the promise of a revision of austerity rules. Merkel has in fact clarified that the departure from fiscal orthodoxy will be only temporary and must take place in compliance with EU rules. The reason for such caution is not only the material impossibility of taking on alone half of Europe, but also avoiding attracting anger at home (by the nationalists) and abroad (from the United States, which would not see well an increase of German influence within the continent). Hence the question we evoked in the opening.

If the EU27 summit gave the go-ahead to the so-called recovery fund, it is not yet clear how much money will be collected and if it will be enough to restart economic growth. Nor how quickly it will become operational: the southerners invoke the June-July horizon, the northerners say they are in no hurry. However, the most pressing political issue concerns the way in which the funds will be distributed: Berlin and Amsterdam want to issue loans, Paris, Rome, and Madrid ask for non-repayable transfers.

President von der Leyen assured that a balance will be sought and that a new Eurogroup (the fourth of the last few weeks) will be called within 15 days, with the task of bringing positions closer together. Prime Minister Conte can therefore claim (partial) victory, if only because it is a result that was not taken for granted a month and a half ago and which demonstrates the government’s ability to open a new path in Europe. As Minister Amendola also pointed out in the aftermath of the summit, in the financial crisis of 2008 European partners took years to find an agreement, until some of them were financially overwhelmed.

The real challenge, however, begins now, having to finally make operational the decisions taken and free up the new resources.