The current crisis can be a great turning point in the history of the European Union. However, we must remember that the recovery fund should correspond with all real economic problems of the member states, with their specificity, expectations and current needs, writes Mateusz Morawiecki.
Mateusz Morawiecki is the prime minister of Poland. This Op-Ed has been written exclusively for EURACTIV.
Poland, the European Union and the world continue to struggle against the coronavirus pandemic. Although we have managed to reduce the impact of the disease in many places, it is an enemy that we are yet to fully eliminate.
At the same time, we are raising more and more questions about the economic effects of the pandemic, affecting the political and economic processes of the European Union. Will the reaction and response from the Community be adequate?
Nowadays, we require an ambitious and decisive response in this regard. Today’s Union should be a Europe of many exclamation marks, not just question marks.
Experts indicate that the COVID-19 pandemic is much more extensive than other diseases of this kind which emerged after World War II. This includes both its geographical and temporal spread and the number of people affected.
The World Trade Organisation now estimates that global trade will decrease by between 13% and as much as 32% in 2020. We must be aware that this is only the beginning of the crisis. Many economic indicators have witnessed drops never before recorded since they were first measured.
This is why Europe is currently carving a path of economic recovery. In the history of European integration, never before has the need for European decisiveness been so urgent.
The current crisis is a major turning point in the history of the Union. Instead of becoming its deadlock, it must become an Archimedean point that will provide a lever for development: ‘give me a lever and a place to stand and I will move the earth.’
Today, we need a real stimulus for economic growth. The latest proposals of the European Commission have brought the ‘lever and a place to stand’ much closer than we could have hitherto imagined. The economic recovery must begin by identifying the ground on which the European economy will stand.
European economic recovery
The most important task is to create a strong investment impulse in the European Union. Investments are intended to be the aforementioned lever for economic growth. The European Commission’s proposal, consisting in the creation of a EUR 750 billion recovery fund, provides a good starting point for achieving this goal.
These are no longer half measures that seek a muddled compromise. This is an ambitious proposal that may build a solid future for the European Union.
For this to happen, the European Recovery Fund must possess two qualities: magnitude and swiftness. The last thing we want is to be stuck in prolonged negotiations. The temptation to introduce half measures or look for shortcuts will lead us astray.
Many EU member states have learned the lesson from the 2009 crisis. Europe requires strong and temporary economic stimulation that will build stable and sustainable economic growth. Recently, the German government announced an additional EUR 130 billion for a stimulus package.
The European Central Bank ramped up its bond-buying programme by EUR 600 billion. The total amount of assets bought is now EUR 1.4 trillion. These can hardly be called financial instruments anymore.
They have become fiscal and monetary rocket launchers. Europe has nothing to lose. The margin of error is very narrow, while the need and expectations for agreement are huge.
United we can do more
The significant breakthrough that will be the acceptance of the EC proposal involves not only the unprecedented amount of aid. In this context, comparisons to the Marshall Plan seem accurate.
However, the crux of the matter would lie in the fact that ⅔ of the funding are grants for the countries, while ⅓ are low-interest loans. The member states will thus not be left to fend for themselves in the face of a crisis. Using its credit rating, the EU may pay joint liabilities based on new, own sources of revenue.
Tightening the European tax system
According to the latest data, as much as 40% of international corporate revenue ends up in tax havens each year. This amounts to around $700 billion.
For the global economy, this means a 10% reduction of the income tax, i.e. by $200 billion. In Europe, Germany, France and the UK lose the most in the process, as their losses are estimated at 20-30% of CIT. In reality, it is detrimental to the whole Community.
This is why we should respond by building sustainable own resources. The digital tax, financial transaction tax and carbon tax would be a great injection of money, based on which we could pay off the loans taken out by the Community. Economists estimate that the potential for income growth could reach up to €170 billion in the EU’s future financial prospects.
Even the best of intentions must be constrained by reason, which is why it is important for the designed Economic Recovery Fund to be a one-time instrument. It must not replace the cohesion policy or the EU’s common agricultural policy.
These are great fruits of European integration that have built a common and resilient European market. By saving Europe’s economy, we must not disturb its foundations.
The Fund should also be flexible and address not only digital or climate issues, but also correspond with all real economic problems of the states – according to their specificity, expectations and current needs.
70 years ago, when Robert Schuman announced the plan that was the beginning of European integration, he said that “Europe will not be created right away, not according to one plan. It will be built on concrete achievements that will first create de facto solidarity”.
In these new circumstances, these words are still relevant today and we must strive to achieve them together.