EU Agrees on Rescue Fund

Scope, consequences and perspectives of the imperialist rescue package.

By Rubén Tzanoff – SOL Spanish State

EU members agreed on the amounts and terms of the “recovery plan” against the Covid-19 crisis.

What are the amounts, how and when will they be distributed? A fund of a total of 750 billion Euros was allocated, distributed as follows: 390 billion aimed at “stimulating the economy and dealing with the coronavirus crisis,” which will reach States as direct aid and will not have to be returned. The remaining 360 billion will be granted in credit, as loans with repayment obligations. In addition, there is the seven-year EU budget of 1.07 trillion Euros. It is the first time that the European Commission (EC) has been authorized by its 27 members to borrow from international markets, to issue bonds and create a common debt to cover the entire fund, in order to finance the States. It will be solved with the creation of new community-wide and local taxes, with taxes on first-use plastics, a carbon tax, a digital tax and others. Ultimately, it will come out of the people´s pockets. Distribution will be in stages, 70% of the aid will be delivered in 2021-2022, the remaining 30% will be transfered in 2023. It will be based on the level of unemployment of 2015-2019 and, from 2023 onward, on the basis of the loss of GDP 2020-2021. For the agreement to take effect, it must be ratified by the Parliaments of each State and the European Parliament.

How was the agreement stitched together? The debate over the amount, requirements and controls of the recovery fund took months, with different positions. The first event that made the agreement feasible was Germany´s “turn,” in which it decided, for the first time, to relax its “austerity at all cost” position and approve aid without repayment. On May 19, Chancellor Angela Merkel and French President Emmanuel Macron announced their intention to commit € 500 billion to the recovery fund. This decision by the two key pillars of the EU opened the door to negotiation with the rest of the Club´s members. The most reticent were the so-called frugal countries (Holland, Denmark, Sweden and Austria) plus Finland, which threatened to veto the “mutualisation” of debts and demanded strict conditions of granting, return and control. This grpup´s main spokesman was Dutch Prime Minister Mark Rutte, who summed up his position: “If you make a request for help, you must make major reforms.” They finally sealed the deal in Brussels, after 90 consecutive hours of conference, bilateral meetings and clashes on the brink of failure. The “frugal” countries renounced their vetoes, but they imposed a 22% cut to the total amount of aid that will not be reimbursed to the EC and the Franco-German tandem, set conditions for using the funds, supervision and achieved an increase in the returns they will receive in the 2021-2027 budgets. That is, more money for their coffers.

Were conditions established? Yes. In the event that any member state considers that there are deviations from compliance, it may require that the matter be dealt with in the EC and transfers be paralyzed, appealing to the qualified majority mechanism (15 states and 65% of the population). They called it the “emergency brake.” In order to obtain the aid, countries will have to present “reform plans aimed at creating employment and sustainability,” tied to the recommendations of the European Commission on the labor market, pensions, budgets and fiscal policy. In addition, “conditionality on the rule of law” was relaxed. This implies that the EU will not be able to make demands against the curtailment or violation of democratic freedoms that governments receiving aid may commit. It was a point of much debate that was drafted with a general formulation, to avoid the veto of Hungary and Poland, whose right-wing governments and authoritarian regimes are under evaluation by the EU Council for the violation of rights.

It is the first time that the European Commission (EC) has been authorized by its 27 members to borrow…

How did Spain do? The central government will receive 140 billion, 72.7 billion of it in the form of non-refundable aid. Sánchez presented it as a great victory for the weak PSOE-UP government and returned emboldened for negotiating the budgets. But he has already perceived that nothing will be easy for him in Congress. There the opinions of the Reconstruction Commission were debated, where he managed to get the packages of sanitary and European conclusions approved, though not the social ones. The reconstruction plan has not had the consensus that the executive expected.

How are the conditions and the labor reform related? Sánchez considers that the conditions are normal because “Spain already has its agenda aligned with the agenda of the European Commission.” Pablo Iglesias affirms that these are “soft conditions that do not imply the need to make cuts.” The agreement of both is accompanied by the leaders of the PP, Cs, UGT and CC.OO., among others. The truth is that the government has already failed to fulfill the promise of repealing all the disastrous labor reforms imposed by Mariano Rajoy (PP), saying that in reality they are only trying to “change the most damaging aspects.” With the agreement, the possibility of making even minor modifications, frowned upon by Brussels, is removed. What’s more, they can try to relax more or turn a blind eye with the deepening of labor abuses installed under the umbrella of the “new normality.”

What are businesses looking for? The bosses are “rubbing their hands.” After having been favored by the State with the Temporary Employment Regulatory Records (ERTE) to which they passed millions of workers, taking their obligations away, the government has already enabled them an amount of 10 billion in order to rescue “strategic companies at the national and regional level.” They are authorized to request from 25 million Euros upwards and thus “strengthen their solvency.” Some of the companies requesting the rescue are: Iberia, the Globalia group, owner of Air Europa and owner of Halcón Viajes, as well as Duro Felguera, among others. The executive´s speakers also warned that their financial entry into companies experiencing a difficult situation is compatible with the aid.

Is it a financial relief? What will happen to the debts? The aid will not reach two trillion as initially contemplated. Nor of 500 billion as requested by France, Germany and the countries of southern Europe. Likewise, the injection of money provides the conditions for a partial recovery of the European economy. It is a ventilator to remove the EU from the intensive care unit, within the framework of a world economy that is sick with a reserved prognosis. The Spanish and Italian public debts had already reached very risky limits before the pandemic, which will worsen in the future, when they have to repay the millions of Euros being borrowed. More debt is always synonymous to budget cuts and austerity.

Why did they not opt ​​for an austerity shock? There are several reasons. 1- In the context of an unprecedented crisis in the capitalist economy, allowing the weakest countries to collapse implies the possibility of dragging down the Union as a whole. 2- The EU is coming out of its worst moment of discredit, crossed by social problems, migratory and political crises, whose maximum expression was Brexit. A new failure could mean a lethal blow in a double sense: the generation of greater weakness in the dispute vis-à-vis other imperialist powers and the increase of distrust in the community’s “Europeanist” project, in favor of “right-wing eurosceptics.” 3- European imperialism evaluated that, in the midst of a pandemic, with thousands of infected people, deaths and growing discontent, this is not the right moment to apply the same recipes that the Troika imposed on Greece when it went bankrupt. 4- Most importantly, they panic at the possibility that the European peoples will rebel, with uprisings, mobilizations and strikes getting out of control, as is happening in different countries around the world. They still have the images of the “yellow vests,” of the historic French strike and of the first reactions of the European labor movement to the consequences of the crisis fresh on their retina.

There will be no generalized welfare, sooner or later there will be more austerity, more precariousness and social inequality.

What´s really “historical” about it? Bourgeois governments celebrated the agreement. According to Emmanuel Macron, it was a “historical day for Europe.” For Angela Merkel “Europe has shown to be capable of acting in this situation.” The President of the European Council, Charles Michel, expressed that “European magic works.” They also spoke of a “re-founding of the EU” and of the “re-channeling of a solidarity project”. Not a word is to be believed. They are guided by their own political convenience and the need to salvage profits. What is truly “historical” is the economic, political and social collapse of the capitalist system.

Is there a “Marshall Plan?” It is valid to make some comparisons between what was the US “European Reconstruction Program” and what will be the EU “Post Pandemic Recovery Plan.” The former was carried out at the end of a world war, with the aim of quelling revolutions and reducing the influence of the USSR after the Yalta and Potsdam Pacts, at which the Western powers and Stalinism divided their areas of influence. The latter will be carried out after the Covid-19 pandemic, to mitigate the effects of the economic crisis and prevent the collapse of the EU. The former was a Program managed by a triumphant and emerging US imperialism as a hegemonic power. The latter will be managed by the high officials of a decadent imperialism, whose Community project is questioned. The former was implemented to create a European market in which to place expanding US production. The latter will be implemented to stop the bankruptcy of companies, the crash of the stock market and the collapse of mass consumption. In the former, the money for the aid came from the US national budget in foreign territory. In the latter, this will be solved with the issuance of bonds and mutual debt. The aid of the former was granted without repayment, mainly to the states of the industrial powers. The aid and loans of the latter will be granted under conditions of structural reforms and repayment, the bulkiest funds will go to the poorest countries affected by the consequences of Covid-19. References to the “Marshall Plan” were linked more to the pressure to obtain aid and to journalistically magnify its results than to a strict similarity with the North American program.

Is there another way out? When the final distribution of the millions of euros in dance is defined, it is possible that a part of the money will be turned over to some social aspects, in the case of the Spanish State, which has defined itself as “the most progressive government in history”. But, surely, those most benefited will be a handful of privileged elites before the needs of workers and the people, of the most vulnerable, the poorest, women, he youth and immigrants. There will be no generalized welfare. Sooner or later there will be more austerity, more precariousness and social inequality. Pacts made by exploiters and oppressors have never favored the great majority and this will be no exception. The injection of money will allow a partial recovery. However, at this stage of capitalism, no aid is proposed that implies a stable, lasting and real recovery of production, because speculation dominates and, in the end, the money will return to the financial circuit that causes the cyclical crises. The bottom line goes through taking basic health measures, prioritizing life over profits, breaking with the EU, forming left-wing alternatives and strengthening socialist and revolutionary organizations that fight for workers’ governments and a Free Federation of European Socialist States.