The ECB wants the European Recovery Fund to be Permanent
The ECB has long been warning about the same faults in the eurozone. The common currency needs to complete the banking union with a common deposit guarantee. And it must add a fiscal capacity to absorb asymmetric shocks. The new €750 billion recovery fund, Next Generation Europe, looks a lot like what the eurozone is missing. The new Instrument for Recovery and Resilience will channel the 360,000 million in loans and 80% of the non-repayable aid.
The Covid-19 pandemic managed to bring the 27 EU countries together to agree on such an ambitious mechanism. The ECB wants the 19 partners who share the euro to draw lessons to make it their own and keep it forever.
In a release published yesterday, they analyzed the new instrument. The Eurobank emphasized that establishing the new fund has indicated a political disposition to design a common fiscal tool when the need arises.
Greece will benefit from the fund largely
After a five-day marathon summit, the rescue fund was approved. It came with a temporary label.
Greece will be the largest net beneficiary of this instrument concerning GDP. Spain and Italy are expected to be among the most affected States in terms of deaths and economic consequences and receive support.
It has also calculated its net impact. Thus, discounting the reimbursements that countries would have to make based on their gross national income to finance the 750,000 million euros that they will ask for in the markets.
However, European leaders promised to create a new fund. This was so that the Member States would not have to make additional contributions. Therefore, the net benefits will likely end up being even higher.
However, the ECB marks that the European response to this crisis has been ambitious and in line with the continent’s challenge.
The ECB agrees with the consensus to maintain budgetary stimulus next year.
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