BRUSSELS (BELGIUM) – Euro zone finance ministers were discussing on Monday to effectively design and coordinate economic plans to find recovery from the COVID-19 crisis, while the European Commission said the pandemic was worsening the economic imbalances within the bloc.
“We will be reviewing the plan the European Union has… to …recover from the effects of COVID-19 and to do that in a way that is more inclusive and more beneficial for all,” the chairman of the ministers Paschal Donohoe said.
The Commission said in a note prepared for the ministers that the pandemic was pushing already highly indebted countries deeper into debt, or increasing problems in areas like competitiveness or employment.
Such divergences between economies sharing the same currency increases the risk of crises and makes the single monetary policy of the European Central Bank less effective.
But reforms and investments funded by European Union money should help address that, the Commission said in its note.
The 27 EU governments have agreed to jointly borrow, spend and repay 750 billion euros to help their economies rebound from the slump induced by lockdowns, and the focus now is on how to best spend that cash.
“A strong implementation of relevant reforms and investments, while making full use of the EU support measures, should tackle the identified imbalances. Addressing imbalances going forward will be key to prevent the risk of accentuating divergences within the euro area,” the Commission note said.
Governments are now preparing plans for how to spend the money allocated to them in grants and cheap loans in the recovery fund.
For the plans to be approved by the Commission and by EU finance ministers, they have to take into account various EU recommendations, such as prioritising investment in the digitalisation of the economy and making it greener.
The Commission also said last year that Germany and the Netherlands should boost investment and household income to reduce their huge current account surpluses.
Italy, Greece, Spain, France and Portugal, however, had to tackle high public and private debts, competitiveness and productivity issues, it said.
Because economies in the euro zone are interdependent, the reforms and investments in one country’s recovery and resilience plan is likely to have spillover effects on others.
“Coordinating national investment and reform efforts will be crucial to improve convergence and resilience,” the Commission said.
