by Frank Schnittger
Thu Jul 23rd, 2020 at 08:27:55 AM EST
For a prestigious UK magazine, the Spectator does print some rubbishy articles, easily debunked. Unfortunately this one by Matthew Lynn, Europe's coronavirus rescue fund is dead on arrival," has now disappeared behind a paywall on the Spectator's main site but is still available in their US Edition (linked to above).
This is my riposte published in the Irish Times (second letter down). It begins by praising an Irish Times article, as this is the best way to get a letter published!
Sir, - Many thanks for publishing Brigid Laffan's excellent and balanced account of the new EU pandemic recovery package and seven-year budgetary framework ("Shape of EU's new political dynamic becomes clearer", Opinion & Analysis, 22nd).
It is a deal that could hardly have been agreed had the UK still been a member, as it would have strengthened the negotiating hand of the "frugal four" - Austria, Denmark, the Netherlands and Sweden.
That has not prevented English Eurosceptics from pouring cold water on the deal, however. For instance, writing in the Eurosceptic Spectator magazine, Matthew Lynn argues that "Europe's coronavirus rescue fund is dead on arrival".
His main points are, first, that it is too small; second, that it comes at the cost of great division within the EU; third, that the environmental or digital taxes proposed to pay back 360 billion in borrowing have yet to be agreed; and finally, that the disbursement of funds will be subject to political review.
First, the 1.8 trillion package is about 30 times the hated and now forgone British net contribution to the budget over the next seven years. Hardly trivial?
Second, EU budget negotiations have always been fractious and difficult. Fortunately, they only come around once every seven years. Hardly the end of the world?
Third, as the debt incurred is not due to be repaid for many years, it was hardly the most urgent order of business now to agree the exact environmental or digital taxes to be levied.
Finally, the disbursement process is to be managed by the European Commission with some oversight by the European Council. That is how the EU budget is always spent and involves the technical expertise of the EU's civil service, together with some democratic oversight. Isn't that how the UK organises its finances?
While always being grateful for the Spectator's solicitude, I think the EU will manage just fine without the UK's involvement. But it is strange to see conservative Eurosceptics worry about the EU's unity, decry the small size of the budget, and express concerns about democratic oversight when they have always been the first to criticise the huge size of the EU's budget and a claimed lack of democratic accountability.
In any case, it is a relief that the EU can now go about its business of mitigating the worst effects of the pandemic and associated economic depression. Hopefully, we will soon resolve outstanding issues around that other distraction, Brexit, although probably not to the satisfaction of the Spectator! - Yours, etc,
There are many legitimate criticisms which can be levied at the coronavirus recovery plan and the seven year budgetary framework which accompanies it, but Matthew Lynn's piece is somewhat wide of the mark. Certainly, it could have been bigger, but this is the first time the EU has borrowed to create a fiscal stimulus and where the loans are effectively mutualised. Matthew Lynn argues this means that the bond rating agencies may rate them as junk, and charge rates of interest similar to that attaching to Greek or Italian bonds. I think it far more likely that German bond interest rates will apply.
Direct conditionality to the observance of democratic norms has been dropped for any grants paid, but such programmes still have to be approved by weighted majority vote in the Council. This means that Poland and Hungary, alone, cannot ensure such conditions cannot be implicitly applied at a later stage. Neither can the Frugal Four, on their own, block payment of loans or grants to Greece or Italy, or make them conditional on their idea of what "reforms" should be instigated in Italy.
The overall plan still has to be approved by the European Parliament, which may apply conditions of its own. For instance it may insist on the restoration of cuts to research and development, climate change mitigation, and public health procurement and coordination measures which were instigated by the Frugal Four. Perhaps the Parliament may even suggest specific Europe-wide, carbon, plastic, digital, or financial transactions taxes to fund any increases in expenditure it proposes.
Certainly, there is much that can be improved in the overall package, but the EU now has the economic certainty of a seven year budgetary framework and coronavirus recovery package to underwrite confidence and national recovery plans closer to home. The Plan even includes €5 Billion to help businesses most effected by Brexit so the UK has been warned: the EU is preparing for a no-deal Brexit, or one that is extremely disruptive of existing markets. Is the UK similarly prepared?
Matthew Lynn might be better off addressing that problem. In posh British circles criticising a club you have just left is regarded as poor form. You would have had your chance to influence the outcome had you chosen to remain a member. Only people regarded as poor sports whinge about a match they have just lost. Watching what the EU is up to from afar is likely to be a poor Spectator sport.