Europe is on the move

The date 15 June 2021 will probably not be etched in anyone's memory, but the history books will record that it was the day the European Commission made the first joint long-term debt issue to finance the recovery funds, known as Next Generation, which are due to start being distributed as early as August. Specifically, 20 billion in ten-year bonds have been raised, but demand has climbed to 142 billion, proof that Europe is considered a safe and profitable long-term investment. In a European Union often lacking in good news to boost its self-esteem, this is no small feat.

Precisely for this reason, the Commissioner for Budgets, Johannes Hahn, appeared in Brussels on Tuesday to emphasise that "it is the largest syndicated transaction ever made by European institutions". The Commission has issued ten-year bonds that have been very well received by investors because it has raised twice as much money as initially planned and have been placed with an interest rate of only 0.08%, above the German debt, considered the safest on the continent (-0.25%), and better than the French (0.13%).

This is a key step in the process of integration of the European Union that has taken over a decade, since experts and governments already wanted so-called Eurobonds to be launched during the previous crisis (2008-2014), but the opposition of Germany and other north European countries such as the Netherlands prevented it. At that time, the EU opted to sort out only the banking sector, which is where the crisis originated, and to impose adjustment plans on the countries of southern Europe, putting budgetary stability first. The covid-19 crisis, however, changed everything and Germany and France understood that without swift and united action by the entire Union the European economy was in danger. However, agreeing on this step meant almost five days of summit meetings in Brussels a year ago and some concessions to the most orthodox.

Among the conditions for accessing the funds is the presentation of recovery plans by member states in which they have to outline how they want to recover their long-term budgetary balance. And this is where one of the unfinished business of European construction comes in: the lack of minimum fiscal integration between the EU-27. Economists have long warned that a single currency and a common market without a shared fiscal policy also leads to internal imbalances and prevents the European Union from acting and responding to crises and global challenges as a single integrated economic power. The fact that proto-tax havens are allowed to exist within the European Union (Ireland, the Netherlands, Luxembourg...) that help large companies to avoid taxes also makes more efficient tax collection and convergence in terms of the welfare state impossible. In this sense, there are many pending policies in terms of unemployment guarantees and the integration of markets such as the digital one. Therefore, a big step forward has been taken, but there are many more to go.