20 July - update from our investment partner

  • 20th July 2020

Today's update from our investment partner

What has happened

The EU summit was meant to be a two-day affair but as the meeting pushes on to the fourth day there are some clear negotiation lines being drawn for the recovery fund.

EU Recovery Fund may be taking shape

Charles Michel, president of the European Council proposed a new plan as the talks were coming to an end at 6am this morning. The latest proposal is a for a package with €390bn in non-repayable grants, a slight increase over the €350bn suggested by the Frugal Four on Sunday which was initially met with significant opposition. With EU budget rebates also on the table for these countries, it seems the EU is getting closer to a deal ahead of the next round of talks at 4pm European time today. Hungary and Poland have also shown some resistance to the package in relation to the policing of payments going forward. Whilst it looks likely that there would be some ability to stop payments if a country breaches EU law or is seen as being excessively fiscally imprudent, the question is over how many EU countries need to agree. Hungary and Poland are pushing for unanimous agreement which clearly equates to no oversight given the targeted country is unlikely to vote for Christmas. Whilst hurdles remain the all-night sessions appear to have, at the very least, teased out the key positions for negotiation.

The latest US package is about to take form

Talks on the latest US fiscal stimulus package will also begin today at the White House with Republicans coalescing around a trillion-dollar package which could possibly include a payroll tax deduction. The Democrats have previously produced a package estimated to be around $3-3.5tn but this was rapidly put down by the Republican controlled Senate. Today’s talks are likely to focus on specific funding for research towards a vaccine or medical mitigation of COVID-19, but also what can be done to support those who are now unemployed without reducing the incentives to find a job in the future.

What does Brooks Macdonald think

The constructive comments from the Austrian Chancellor suggests that the latest European Council proposal isn’t a million miles away which is undoubtedly a positive for EU recovery fund talks. Several thorny topics remain but the group appear to have moved on from the top level philosophical debate over grants vs loans which was the key stumbling block in recent months.

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