London Daily

Focus on the big picture.
Saturday, Dec 06, 2025

Europe’s coronavirus rescue fund is dead on arrival

Europe’s coronavirus rescue fund is dead on arrival

Just imagine what would happen if real money was at stake. Over the last four days, the leaders of the European Union have been furiously haggling over their Coronavirus Rescue Fund. France’s President Macron has been banging the table angrily, the Dutch have taken on the role vacated by the British of the ‘bad Europeans’, and the Germans have been cautiously digging into their wallets to pay for the whole thing. In the end, however, they came up with a deal.
Arch-federalists will hail this as a ‘Hamilton Moment’ – a decisive step towards a more united Europe where the richer states help rescue the poorer, distributing money around the continent in a moment of ‘solidarity’. And while there is an element of truth in that – the EU will, for the first time, borrow money itself – no one should fall for the hype. In truth, the Recovery Fund is likely to be dead on arrival. Here’s why:

First, it is too small. The EU likes to spin big numbers, but the headline €1.5 trillion (£1.62 trillion) includes its normal spending for the next seven years. And the loans hardly count. After all, Italy or Greece can borrow money themselves if they need to. The only significant number is the ‘grants’, which the so-called ‘frugal four’ scaled back from €500bn to €390bn (£450bn to £350bn). Out of a total EU GDP of €15 trillion (£13.5 trillion) that is not exactly chickenfeed, but neither is it a game-changer. On top of that, the ‘rebates’ offered by the frugal four mean it will be even less in real terms, because they will claw some of that money back. In macro terms, it is not going to make much difference.

Next, it has hardly been an amicable agreement. The money has been squeezed out of the frugal four countries after a bitter argument, and so nothing more is likely to be forthcoming. Even worse, the Dutch secured an ‘emergency brake’ on spending, so they will be able to argue for years about how Italy or Greece use the money. Member states will also potentially be able to veto spending by other countries. That is a recipe for turning every bailout and infrastructure project into a pan-European row. If you are Dutch or German journalist with a taste for Eurosceptic clickbait, the next few years are going to be a lot of fun.

Thirdly, very little has yet been said about how the debt will be repaid. If you borrow money, you have to have some sort of mechanism to pay it back one day. The EU has plans for a plastics levy, but apart from that there is just some waffle about green and digital taxes. Those will be hard to agree, even harder to collect, and may well hurt the recovery as much as the extra spending helps it.

Even more worryingly, the shiny new EU bonds might end up rated as junk, or close to it. Why? Because every member state is ultimately on the hook for the money, so the ratings agencies may decide, quite rightly, that the EU bond has the same rating as Greek or Italian debt. Finally, the distribution of the money looks as if it will be completely political, with far more spent on grand French industrial projects in ‘green industries’ such as batteries for electric cars than rescuing small businesses in Italy and Spain.

There is no question that a genuine, functioning Recovery Fund was needed. Without one the imbalances within the Eurozone will just grow wider and wider. Germany and Holland will start to grow again a lot more quickly, and a lot faster, than Italy, Greece or Spain. The Recovery Fund is meant to fix that, and stabilise the Eurozone. But it will simply end up making its divisions far, far worse.
Newsletter

Related Articles

0:00
0:00
Close
Drugs and Assassinations: The Connection Between the Italian Mafia and Football Ultras
Hollywood megadeal: Netflix acquires Warner Bros. Discovery for 83 billion dollars
The Disregard for a Europe ‘in Danger of Erasure,’ the Shift Toward Russia: Trump’s Strategic Policy Document
Two and a Half Weeks After the Major Outage: A Cloudflare Malfunction Brings Down Multiple Sites
UK data-regulator demands urgent clarity on racial bias in police facial-recognition systems
Labour Uses Biscuits to Explain UK Debt — MPs Lean Into Social Media to Reach New Audiences
German President Lays Wreath at Coventry as UK-Germany Reaffirm Unity Against Russia’s Threat
UK Inquiry Finds Putin ‘Morally Responsible’ for 2018 Novichok Death — London Imposes Broad Sanctions on GRU
India backs down on plan to mandate government “Sanchar Saathi” app on all smartphones
King Charles Welcomes German President Steinmeier to UK in First State Visit by Berlin in 27 Years
UK Plans Major Cutback to Jury Trials as Crown Court Backlog Nears 80,000
UK Government to Significantly Limit Jury Trials in England and Wales
U.S. and U.K. Seal Drug-Pricing Deal: Britain Agrees to Pay More, U.S. Lifts Tariffs
UK Postpones Decision Yet Again on China’s Proposed Mega-Embassy in London
Head of UK Budget Watchdog Resigns After Premature Leak of Reeves’ Budget Report
Car-sharing giant Zipcar to exit UK market by end of 2025
Reports of Widespread Drone Deployment Raise Privacy and Security Questions in the UK
UK Signals Security Concerns Over China While Pursuing Stronger Trade Links
Google warns of AI “irrationality” just as Gemini 3 launch rattles markets
Top Consultancies Freeze Starting Salaries as AI Threatens ‘Pyramid’ Model
Macron Says Washington Pressuring EU to Delay Enforcement of Digital-Regulation Probes Against Meta, TikTok and X
UK’s DragonFire Laser Downs High-Speed Drones as £316m Deal Speeds Naval Deployment
UK Chancellor Rejects Claims She Misled Public on Fiscal Outlook Ahead of Budget
Starmer Defends Autumn Budget as Finance Chief Faces Accusations of Misleading Public Finances
EU Firms Struggle with 3,000-Hour Paperwork Load — While Automakers Fear De Facto 2030 Petrol Car Ban
White House launches ‘Hall of Shame’ site to publicly condemn media outlets for alleged bias
UK Budget’s New EV Mileage Tax Undercuts Case for Plug-In Hybrids
UK Government Launches National Inquiry into ‘Grooming Gangs’ After US Warning and Rising Public Outcry
Taylor Swift Extends U.K. Chart Reign as ‘The Fate of Ophelia’ Hits Six Weeks at No. 1
250 Still Missing in the Massive Fire, 94 Killed. One Day After the Disaster: Survivor Rescued on the 16th Floor
Trump: National Guard Soldier Who Was Shot in Washington Has Died; Second Soldier Fighting for His Life
UK Chancellor Reeves Defends Tax Rises as Essential to Reduce Child Poverty and Stabilise Public Finances
No Evidence Found for Claim That UK Schools Are Shifting to Teaching American English
European Powers Urge Israel to Halt West Bank Settler Violence Amid Surge in Attacks
"I Would Have Given Her a Kidney": She Lent Bezos’s Ex-Wife $1,000 — and Received Millions in Return
European States Approve First-ever Military-Grade Surveillance Network via ESA
UK to Slash Key Pension Tax Perk, Targeting High Earners Under New Budget
UK Government Announces £150 Annual Cut to Household Energy Bills Through Levy Reforms
UK Court Hears Challenge to Ban on Palestine Action as Critics Decry Heavy-Handed Measures
Investors Rush Into UK Gilts and Sterling After Budget Eases Fiscal Concerns
UK to Raise Online Betting Taxes by £1.1 Billion Under New Budget — Firms Warn of Fallout
Lamine Yamal? The ‘Heir to Messi’ Lost to Barcelona — and the Kingdom Is in a Frenzy
Warner Music Group Drops Suit Against Suno, Launches Licensed AI-Music Deal
HP to Cut up to 6,000 Jobs Globally as It Ramps Up AI Integration
MediaWorld Sold iPad Air for €15 — Then Asked Customers to Return Them or Pay More
UK Prime Minister Sir Keir Starmer Promises ‘Full-Time’ Education for All Children as School Attendance Slips
UK Extends Sugar Tax to Sweetened Milkshakes and Lattes in 2028 Health Push
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
×