'Next Generation EU' plays a crucial role in reducing the risk of an asymmetric recovery and in enabling hard-hit countries in southern Europe to support their economies, while avoiding and changing the rise in government debt levels word.
The focus of Germany's recovery plan is on investments in digitalisation and climate protection, but the summers in question have been pale in comparison to the country's significant investment needs.
France's recovery package represents a good mix of structural reforms and investment in a future - proof economy. The time will be crucial for President Macron to reap the benefits of the economic revival plan, as his options for re-election in 2022 will largely depend on it.
Italy's recovery plan marks all the right fields and is an ambitious review of the economy. In particular, it will play a key role in whether Gordon's knots can be fed by an inefficient public administration and an opaque legal system or can be used effectively on the ground.
Spain's recovery plan is among the best in terms of the green transition, and the clear focus on diversifying the economy away from (low productivity) services could increase the potential away.
Solving the risk of asymmetric repair
'Next Generation EU' (NGEU) recovery fund after 750 billion coronavirus. The EUR not only represents an important milestone in European integration, but also plays an important role in reducing the risk of an asymmetric recovery between Northern and Southern Europe. For the NGEU, the European Commission is authorized to raise up to DKK 750 billion. EUR in the capital markets, which we believe will be one of the largest issuers in Europe in the coming years. To receive financial support from the fund, countries must draw up national recovery and resilience plans and set out their reform and investment agendas (with at least 37% of green investment spending and 20% digital investment spending). The Commission's plans currently expect full financial support to be provided by the end of 2023 and to a large extent to be disbursed over the period 2021 to 2024. The latest forecast from the European Commission is expected to have an economic impact of approx. 1.2% of the EU's real GDP 2019 generated by the NGEU Recovery and Resilience Facility until 2022. Overall, we expect the biggest boost of the NGEU funds to the euro area economy to be realized from 2022-2024 (see graph opposite).
NGEU funding reduces the risk of premature withdrawal of fiscal support at national level, especially for countries already concerned about fiscal sustainability. Although the NGEU will not help the euro area recover much in the short term, we see it as an important element of 'bridge financing' that supports public investment at a time when some national fiscal initiatives would otherwise have to fall back. This is especially true for countries hard hit in southern Europe, as funding through the EU space provides scope to support their economies while avoiding a clear increase in government debt levels.
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