Surprise Not: EU Reaches "Fist-Banging" Deal

Mish

After another marathon session the EU reached a Covid stimulus deal.

The BBC reports EU Leaders Reach Recovery Deal After Marathon Summit.

EU leaders have struck a deal on a huge post-coronavirus recovery package following a fourth night of talks. The summit, which began in Brussels on Friday morning, saw more than 90 hours of talks and became the EU's longest since a 2000 meeting in the French city of Nice, which lasted for five days.

Summit chairman Charles Michel said it was a "pivotal moment" for Europe. 

The self-proclaimed frugal four - Sweden, Denmark, Austria and the Netherlands - along with Finland, had opposed allowing €500bn to be offered in the form of grants to countries hardest-hit by Covid-19. The group, led by Dutch Prime Minister Mark Rutte, originally set €375bn as the limit, in addition to wanting conditions such as the right to block requests.

At one point French President Emmanuel Macron reportedly banged his fists on the table, as he told the "frugal four" he thought they were putting the European project in danger.

Details 

  • The EU €750bn (£677bn; $859bn) in grants and loans to counter the economic impact of the pandemic.
  • €390bn in grants to member states hardest hit by the pandemic the rest is loans that have to be paid back.
  • The frugal 4 were won over by the promise of rebates on their contributions to the EU budget.

"Never before did the EU invest in the future like this," Belgian Prime Minister Sophie Wilmès tweeted.

Blackmail in Review

Yesterday , in Italy Accuses Wealthy North European States of Blackmail I offered these comments.

Mission Impossible?

When it comes to the EU, I am skeptical of headlines like this: EU leaders struggle with 'mission impossible' at deadlocked recovery summit.

The Problem with Deals

The EU is known for last minute deals. In fact, there is seldom if ever a deal except at the last moment.This happens because all 27 nations have to agree to make changes of any substance.

No Surprises Either Way

I will not be surprised by a deal, but it will not be the deal Lagarde hopes for.

Instead, assuming there is a deal, it will be based on smoke, mirrors, and promises that morph into outright lies.

Deal in Perspective

  • The EU collectively is nearly the same size as the US.
  • The US has spent at least $2 trillion with another $2 trillion or more on deck.
  • Try to imagine Nancy Pelosi or Trump bragging about $400 billion in grants to Illinois, California, and New York, paid for by the rest of the nation, with rebates to the rest of the nation for their contributions to Illinois, California, and New York. 
  • Every penny above €390bn is a loan.

Check, Check, Check 

The frugal four will "generously" donate €390bn in grants after a fist-banging affair on the promise of rebates on their contributions to the EU budget.

How much are they really donating? 

A safe guess is about half that but the way the EU plays games with leverage it could easily be about a tenth of that.

Alternatively, the rebate promise could be an outright lie.

Smoke, Mirrors, and Lies

So take your pick. What combination of smoke, mirrors, and lies is it?

Regardless, €390bn split among the hardest hit (Italy, Spain, and France) is hardly anything to crow about no matter how you parse this out.

Comic Exaggerations

For more how the EU operates on smoke and lies, please see my humorous report on how the EU's Climate Change Effort is Comically Exaggerated.

Mish

Comments (20)
No. 1-11
b2b
b2b

Worst possible news to wake up to if you live in Sweden as I do. My money won't go to the countries worst affected by Corona but to the corrupt regimes in southern Europe where it will be embezzled. Retarded on so many levels. Ironically the only political party against this horrible giveaway is the far left party, all the rest stay silent.

Casual_Observer
Casual_Observer

Looks like Trump's plan is to use DHS for political purposes. He also interprets the DACA ruling as more executive power on all things. Hang on to your hat.

FromBrussels
FromBrussels

Thank gowd, the european FREAK show can go on, yet again ......for awhile ....

Herkie
Herkie

We (and Europe) have got to stop seeing this as red or blue states, we are all America, and same in Europe, those four are part of Europe as a whole or they are not, they need to make up their minds.

What if there is an earthquake in California, you should not have to pay for such a disaster because you believe that state squandered it's money giving abortions to poor women? What about a hurricane hitting Florida or Texas, we democrats should not have to pay for the damage because we believe your politicians are rewarding the uber wealthy Wall Street billionaires with tax cuts and gifts to corporations so have nothing left for an emergency? And will not pay for disaster relief because it costs too much? So the blue states pay a disproportionate share of the cost because that is where the people ACTUALLY live, in urban American blue states?

The US and EU are having the same problems this way, one political subdivision does not see why it should have to pay for WRONG economic and fiscal policy of another. It has to stop or we just as they will inevitably have to go their separate ways.

Anda
Anda

What you forget maybe is that the difference in spending between the US and EU might be made up of national deficit sponsored by finance and ECB. Some of these countries are also very good at generating funds that stay off the books if gfc is any example, for example nationalisation of business underwritten by government guarantees.

So this all looks like standard EU creep and corruption. You will have an ongoing drama of north vs south regarding allocation of funding and fiscal commitment, overseen by EU which becomes empowered as arbitrator. In the south some are saying eurobonds (mutual issuance) is now a reality. You will also have southern countries offering themselves to EU oversight, various have factions in power that want the old ways and national identity changed if not deleted. Various other national political entities are also corrupt, or have interests that make them beholden to outside decision making. Now they will have that excuse "otherwise all funding stops". The north will have access to whatever firesales go on, will gain financial influence. As for EU , it will just assume greater power, starting with taxation to repay these loans :

Maximus_Minimus
Maximus_Minimus

Surprised. Thought this giant squandering of good money would require two rounds of champagne.
PS: Would make it conditional on investigation why it took them a month after Asia to figure out they had a pandemic on their hands - the reason for this squandering.

simb555
simb555

Very good report. Learned something about this confusing so called deal. This is the kind of stuff we read you for. Leave the Trump bashing to the corrupt NY Times.

Tony Bennett
Tony Bennett

"€390bn in grants to member states hardest hit by the pandemic the rest is loans that have to be paid back."

...

Sure sure ... on the back half of sentence.

Everyone knows they will never pay it back. This machination purely to win passage from the recalcitrants. Once $$s given to the on the rope countries .... uhh, sorry, no way we can pay it back ... and, so what, what are you going to do about it??

Mnuchin already floated the idea of recipients PPP $$ (under $150K) not having to pay ANY of it back ... or even bother filing anymore paperwork for grant. Wonderful. Totally screws small businesses who did not get funds due to worrying about having to pay it back (at least some of it).

Anda
Anda

Unreal to see this so obvious an extension of EU reaching straight through openly to national politics. Even pretense seems gone now, no national presentation or questioning just to business with full arrogance. I say this after reading headlines in Spain, which simply put it "PM summons all regional heads so they can decide how to spend the money". In short nor nations nor EU had any plan to present before authorising this amount of money...just an adhoc several hundred billion to go to whatever and whoever, to be argued over later.

caradoc-again
caradoc-again

Can totally sympathise. Sweden is lost.
EU politicians know no fear as they are protected.
When they feel fear they will change.
Will only get worse until then.

Stuki
Stuki

"Never before did the EU invest in the future like this"

And that, is exactly the problem.


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