‘Frugal four’ warn pandemic spending must be responsible

16/6/2020

By Stefan Lofven

There is no such thing as new or fresh money. Rescue funds will have to be paid back

The writer is prime minister of Sweden. Prime Ministers Mette Frederiksen of Denmark and Mark Rutte of the Netherlands and Chancellor Sebastian Kurz of Austria co-wrote this article

The Covid-19 crisis is a global humanitarian emergency. It has taken a heavy toll in human lives. We mourn these losses and our thoughts are with all who have to deal with this tragedy on a personal level.

The fight against the pandemic has paralysed societies and large parts of the European economy. It is truly unprecedented.

The EU has already taken bold decisions to mobilise historic amounts of money to sustain businesses and employment. And our four countries — Sweden, the Netherlands, Denmark and Austria, known collectively as the “frugal four” — are willing to do more.

What we do in the EU is about solidarity, which goes hand in hand with sustainable European growth. Belonging to a close and deep circle of friends and allies, we owe that to each other. We share the strongest integrated market. Getting this single market going again, at full speed, is of paramount importance in freeing ourselves from this crisis.

Volvo workers in Sweden and Philips workers in the Netherlands depend on economic development in Greece and Slovakia. The stronger the Italian and Spanish economies are, the better for Denmark and Austria. And vice versa. We are in this together.

The outlook now is bad — the OECD forecasts gross domestic product losses this year of 7, 8, 10 per cent and more for individual EU countries, instead of expected growth. This situation is shared by all in the EU. Therefore, all four of us give our full support to building a joint road to recovery.

But in doing that, important principles ought not to be thrown overboard. How could it suddenly be responsible to spend €500bn of borrowed money and send the bill into the future?

Part of the EU Commission’s recent proposal is based on finding new ways for the bloc to finance itself. But there is no such thing as new or fresh money. Money spent will also have to be earned and paid back — by taxpayers.

We fully support the creation of a time-limited emergency recovery fund. We want it to target those that have been hit hardest by the Covid-19 crisis. We believe that when we borrow money together in the EU, the fundamentally sound way to use that money is to convert it into loans for those who really need them, on the best possible terms.

When such investments are directed towards the real needs and harnessed by reforms, they can help kick-start the economy and make it stronger and more resilient for the future. Embracing the green and digital transformation will also be essential for moving ahead after coronavirus, to foster growth and job creation and to allow loans to be repaid, in line with sound economic principles.

This possibility ought to be open for those sectors and regions hardest hit by the pandemic. There should be specific and crisis-related criteria to base decisions on. Conditions on the ground should decide where the money goes. Taking decisions now based on pre-crisis statistics simply makes no sense.

The emergency recovery fund should be open until the end of 2022. It needs to be of a significant size, but not bigger than could usefully be absorbed by member states during the present emergency.

This crisis measure must not be mixed up with other challenges and priorities of the EU. These are addressed in our long-term budget from 2021 to 2027. Agreeing on that is also a matter of urgency, if things are to be up and running in time.

Lessons learnt from the pandemic should be reflected in the new budget. But in setting new priorities, one must also reprioritise. Everything cannot be equally important. That is the method we will also have to apply now.

We are all affected by this crisis, and it puts all national budgets under severe strain. So we must all have a realistic level of spending. Most importantly, money should be used carefully and only where we know it will make a real difference.

The four of us are ready to agree on an emergency recovery fund and on the 2021-27 budget. Working with the European Council president, Charles Michel, and other EU leaders, we are convinced that a compromise will be found that makes Europe greener, stronger and more resilient, while strengthening member states’ economies and making the union fit for the future.

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