Von der Leyen has just announced the Commission's "Rearm Europe" plan. The most important parts target national fiscal space: The Commission will activate the national escape clauses in the fiscal rules and put a new loans-based instrument on the table. Here is what it means: - ThreadSky

lucasguttenberg.bsky.social • 5 days ago

Von der Leyen has just announced the Commission's "Rearm Europe" plan. The most important parts target national fiscal space: The Commission will activate the national escape clauses in the fiscal rules and put a new loans-based instrument on the table.

Here is what it means:

Comments

coletteaustin.bsky.social•5 days ago

📌

sunnawendi.bsky.social•4 days ago

I like these careful considerations. They are a load of bullshit.
Europe has a few(!) years before the showdown and nothing of the above will have any relevance after.

jp1878.bsky.social•5 days ago

Shame the UK isn’t in the EU. What does this mean for us here?

lucasguttenberg.bsky.social•5 days ago

First, the Commission will activate the national escape clauses in the EU fiscal rules. @nilsredeker.bsky.social and I have published a whole paper on how it works and why it is both risky and not sufficient to enable a durable increase in defense spending. More in this thread:

lucasguttenberg.bsky.social•5 days ago

Second, the Commission will put a new instrument on the table to provide 150bn in loans. This is consistent with @table.media reporting this morning that the pandemic-era SURE instrument will get a younger, more powerful sister. So how would a Rearm-SURE likely work?

lucasguttenberg.bsky.social•5 days ago

The tool will be loans-for-loans, so the EU issues debt in the market and lends the money on to member states. The benefit for member states - the transfer element - is not in the volume, as they could just issue themselves, but in the difference between their own funding costs and the EU's.

lucasguttenberg.bsky.social•5 days ago

Naturally, that only makes sense for member states with higher funding costs than the EU. As can be seen in the graphs, there are some that have higher funding costs. But the spreads over EU debt are really not large and hence the actual financial benefit will be limited for most member states.

lucasguttenberg.bsky.social•5 days ago

A special situation arises for countries that have their own currency - loans from the EU are issued and have to paid back in Euro, so the relevant comparison are Eurobonds (bonds issued in Euro) by these countries. Latvia and Estonia have so tiny bond markets that a comparison is hard to make.

westervangaal.bsky.social•5 days ago

could be useful for romania/hungary?

lucasguttenberg.bsky.social•5 days ago

Why does it matter that the benefit accruing to most member states will be very small? Because Von der Leyen announced that the money should be used for joint procurement and for helping Ukraine. But of course the smaller the benefit, the smaller the leverage on the Commission's side.

roel.cool•5 days ago

Hi Lucas, complete layman on EU budget procedures here.
Key question I have: Will the member states be allowed to keep these loans (partially) out of their budgets when they submit them in the European Semester?

rs-lawsociety.bsky.social•5 days ago

use of Article 122 TFEU intrigues

ericdawson68.bsky.social•5 days ago

Thank you for this. I was worried that Orban or Fico could veto the plan but it seems they can't, at least on the finance matter.

maaikeverbruggen.bsky.social•5 days ago

Thanks, very helpful

borkedhonkersaur.bsky.social•5 days ago

Thank you for this excellent breakdown

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