Insights | Brussels rentré


Brussels rentré

Summer holidays are important for Europeans. Brussels, the EU capital, slows down considerably in August every year. This year has been different. People holiday travels have been restricted due to corona. The necessary economic recovery efforts have kept lots of people busy despite the callings from the sun and the beaches. And, which is not unique for 2020, the rest of the world is not on holiday.
COVID-19 still create a great uncertainty in Europe and the EU. As people come back to work and schools from holidays, it is likely that we will see an increased number of infected people. This poses problems for the national governments; do we see a second wave or just a result of eased restrictions?
Travel restrictions between EU countries keep changing daily and we are likely to see continued lockdowns during the autumn. However, we believe that these lockdowns will be more limited than they were during the spring and summer. Shut downs of whole economies will probably not happen.
From a Brussels perspective, the highlight of the summer was the July agreement among EU leaders on a Recovery package. Next generation EU, the Star Trek inspired name of the package, is a €750 billion fund to help Europe recover from the economic chock the virus and the subsequent lockdowns created.
As always in the EU system, the devil is in the detail. Leaders agreed on the framework after four days of intense discussions. Enter the legislative details, the exact objectives, scope, definitions, and not least different lobby interests.
Most of the money will be transferred via the EU countries. During autumn, member states will present their national recovery plans, and these will have to be approved by the system before any money can be distributed. Expect massive debates and negotiations.
Before corona arrived, the EU machine was up to speed after elections to the European Parliament and a new European Commission in 2019. The flagship initiative was the Green Deal – a massive program to make the EU climate-neutral in 2050. Covering nearly all industry sectors, the Green Deal could be described as the most ambitious EU endeavor since the Single Market reforms in the 1990s.
The question is how the virus will affect these ambitions. Will focus shift from saving the world to saving the economy, or will the current situation instead facilitate the transition to a sustainable economy?
A large part of the Brussels establishment would claim that the Green Deal initiatives are great tools to restart the economy. Investments in green technology and infrastructure will boost job creation as well as improve the environment. There is no contradiction between the two. The €750 billion fund will certainly help this side of the argument.
On the other side, national governments could be more focused on getting people back to work, and it is easier to restart what we already know than to invent new jobs.
The main risk is that existing European divisions will grow. We saw during spring that some countries had no problems supporting jobs and industries, whereas less affluent countries struggled.
Germany has already spent over a trillion euro on state aid, i.e. more money than the whole EU Recovery fund, facilitated by substantial exemptions from the normally quite tough EU state aid rules. The rich get richer and the poor fall back. Not a great recipe for European unity.
I have been in Brussels the last 20 years. There has always been a crisis. From the dotcom-bubble, via the failed referendums on the constitution, to the financial crisis, terrorism, and threats to our democracy both from internal and external sources.
However, the EU has always developed through crisis. When EU countries at the start of this crisis turned inwards and put up borders, the EU stepped in and coordinated a better response.
As long as there is a political will, and I would argue it still exists, the EU will manage also this crisis and get out of it stronger. It will not be simple, it will not be as ambitious as some leaders claim, but there will be steps in the right direction.
Having said this, let me end with a quote we often use in Kreab. It is likely that something unlikely will happen.

Karl Isaksson, Executive Vice President, Managing Partner Brussels