Published on Monday, May 17, 2021

Europe | Marshall in Brussels

The pandemic has led to several historical comparisons, such as the 1918 influenza and the Roaring Twenties that followed. Another clear comparison is the massive Next Generation EU (NGEU) fiscal stimulus set to be launched in Europe, which resembles the Marshall Plan passed following World War II, but for the modern age.

Key points

  • Key points:
  • It's likely that the NGEU plan will arrive slightly late, and although it may help to recover pre-pandemic activity levels, it may also be unnecessary as a demand tool and simply be an addition to the strong rebound in activity that is expected once the vaccination process is complete.
  • The size of the requests made of Brussels is very high, mainly in the peripheral countries. In subsidies alone, Spain will receive 6.2% of its GDP, with Italy receiving 4.2%, Portugal 6.9% and Greece 10.7%. Germany will only receive 0.8% and France only 1.7% due to the program's strong distributional component.
  • Among the large countries, only Italy has committed to requesting loans (Greece and, in part, Portugal have done so as well); Spain will do so at a later time if necessary. Germany and France, with smaller relative allocations and less pandemic-related losses, will similarly not request loans.
  • In addition, the pillars of combating climate change and digital development will be at the center of the aid, as required by Brussels, which has mandated that a minimum percentage of the funds be put toward both items.
  • Each country will also look to further its 'traditional' interests. Examples of this are Italy's dedication to its high-speed rail system, France's dedication to the aeronautical sector and the peripheral countries' dedication to the tourism sector. Much of this aid is justified, but it also poses a risk that the large influx of money will distort the rules of competition.

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