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Marathon EU Summit (22 July 2020)

Marathon EU Summit (22 July 2020)

Context

European Union leaders finally clinched a deal on an unprecedented 1.8 trillion-euro budget and coronavirus recovery fund.

Background

  • The decision was taken after four days and nights of fighting and wrangling over money and power in one of their longest summits ever.
  • The 27 leaders were constantly reminded of the potent medical and economic threat the virus poses to their continent, and grudgingly committed to a massive aid package for those hit hardest by the pandemic.

Summary of the Debate

Coronavirus fundEU chart.PNG

  • The EU will establish a 750 billion-euros or 859 billion dollars coronavirus fund to tackle the biggest recession posed by the Pandemic.
  • The fund is partly based on common borrowing and to be sent as loans and grants to the hardest-hit countries.
  • The EU was slow to coordinate its initial response to the COVID-19 pandemic.
  • It was already weakened by Britain's departure from the bloc.
  • A united front on economic aid would demonstrate that it can step up to a crisis and stay united.
  • The northern European countries especially the Nordic countries will pay the most.
    • Italy, Spain, Greece are amongst the largest beneficiaries of this fund.
  • The deal still has to go to the European Parliament and needs ratification by all the 27 countries.

Key Takeaways of the summit from India’s Perspective

  • Strategic Roadmap: The summit is a great sign about political intentionality, ramping up what the two sides can do.
    • It is about the political will to look beyond the Economics which is framing and defining the hallmark of the India-EU strategic partnership.
  • It shows, in a pandemic world, how India and the EU will cooperate with each other.
    • How the two sides bring together the leadership and resources to address the kind of challenges that are coming in the future.
  • In terms of global governance and public health, it now becomes a global public good and that is going to impact the way the political decision are going to be taken.

Issues faced by EU

  • After the Brexit, the burden of Finance increased for the rest of the members. There is always a mismatch between the monetary and financial policies of the European member state and European central bank.
  • The major economies of the EU like Germany and others are also facing the heat of Pandemic. Germany is primarily an export economy and due to lockdown in most of the countries is facing problem
  • The main crisis: The major issue was of Europe’s Frugal Four Austria, the Netherlands, Sweden and Denmark. They are the strong economies in the European Union and do not run up deficit.
  • On the other hand the southern economies of EU are the opposite.
  • Frugal Four and the northern countries demand the internal reforms in the southern countries, which was bone of contention.

How the deal is important for Europe?

  • The 750 billion Euros deal will provide a real stimulus to Europe. It will allow them to borrow at very low rates using their Triple-A (AAA) debt rating.
  • It shows the unified stance that they will help all the economies of Europe to stand together.
  • It was the first major European Union Summit post-Brexit. After Britain has gone, France and Germany are now up to the leadership and are setting the conditions and examples in the EU.
  • EU has always played the role of a moral block which sets high standards for environmental, humanitarian aspects but never took a bigger role in geopolitics, but now is the opportunity for this to be the important alternative of the USA.
  • The deal shows the reformulation going to happen within the European Union. The Frugal countries have pressurized the Southern and Central countries to bring reforms within their economies.

Way Forward

  • Europe has its own structural problem in the economy, especially in the South, therefore this is the moment to bring reforms in those sectors.
  • Europe is showing the way to the world and other multilateral platforms as a block to stand together. After some Asian countries, Europe is best in handling the pandemic.
  • EU needs to be more active to play a major role in geopolitics.

Conclusion

The deal is a positive development and the first step towards financial integration of Europe. It’s an opportunity for Europe to press the reset and start afresh with the stimulus package. This is an important moment for Europe to show others the way and take the lead.

Main Points Made By The Guests

1. Prof. Ummu Salma Bava, Chairperson, Centre for European Studies, JNU 

  • The summit is a great sign about political intentionality, ramping up what the two sides can do.
  • It is about the political will to look beyond the Economics which is framing and defining the hallmark of the India-EU strategic partnership.
  • It shows, in a pandemic world, how India and the EU will cooperate with each other.

2. Pramit Pal Chaudhuri, Foreign Affairs Editor, Hindustan Times 

  • After the Brexit, the burden of Finance increased for the rest of the members. There is always a mismatch between the monetary and financial policies of the European member state and European central bank.
  • The major economies of the EU like Germany and others are also facing the heat of Pandemic. Germany is primarily an export economy and due to lockdown in most of the countries is facing problem
  • The main crisis: The major issue was of Europe’s Frugal Four Austria, the Netherlands, Sweden, and Denmark. They are the strong economies in the European Union and do not run up the deficit.

3. Gurjit Singh, Former Ambassador 

  • The 750 billion Euros deal will provide a real stimulus to Europe. It will allow them to borrow at very low rates using their Triple-A (AAA) debt rating.
  • It shows the unified stance that they will help all the economies of Europe to stand together.
  • It was the first major European Union Summit post-Brexit. After Britain has gone, France and Germany are now up to the leadership and are setting the conditions and examples in the EU.

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