The leaders of the Baltic countries expressed satisfaction with the funds that were allocated to them under the seven-year EU budget adopted in Brussels. However, there are doubts that people's lives will become better with the help of those funds.

The main intrigue of the EU summit in Brussels

The EU's seven-year plan was drawn up and agreed upon a quite a while ago. The recovery post-pandemic fund Next Generation EU, which amounts to 750 billion euros, caused most of the controversy during the summit. The European Commission plans to borrow this money from financial markets on behalf of the EU and distributed it in the form of subsidies (390 billion euros) and loans (360 billion euros).

The main intrigue was about how much money from this fund would be distributed through loans, and how much - through subsidies. EU donor countries - Denmark, the Netherlands, Austria and Sweden - won the struggle by reducing their share of subsidies from $500 billion to $390 billion.

The Baltic leaders are beaming with satisfaction

Thus, Latvian Prime Minister Krisjanis Karins said that Latvia would receive almost 10.5 billion euros from the approved EU budget, which is 39 percent more than was allocated in the previous seven-year period from 2014 to 2020. In addition, if necessary, Latvia will have an opportunity to borrow about 2.5 billion euros more "on very favorable terms."

Karins noted that despite the fact that the volume of funds after the UK's exit from the EU was decreasing, Latvia would receive more funds than in the previous period. Latvia will continue to receive more from the general EU budget than it contributes to it - an average of 3.6 euros for each euro contributed, the office of the Latvian Prime Minister said. 

Lithuanian President Gitanas Nauseda, who chaired the republic's delegation at the summit, noted that the EU's multi-year budget would allow Lithuania to implement the path of "welfare state" development. Compared to the previous financial period, Lithuania managed to receive 1.7 billion euros more from EU funds - 14.5 billion euros, he said. According to the press service of the president, for every euro paid to the EU budget, Lithuania will receive four euros of EU aid back.

Cohesion funds allocated 6.2 billion euros to Lithuania, and the country will receive 5 billion euros from agriculture funds. The rest of the money will be allocated for the closure of the Ignalina Nuclear Power Plant, the Kaliningrad transit and the development of infrastructure transport projects.

Estonian Prime Minister Juri Ratas said that Estonia would receive 6.8 billion euros from the EU budget by 2027. Of these, three billion euros would be allocated to fund the "policy of cohesion," while the requirement for the co-funding share of projects would decrease - from 45 to 30 percent. This will reduce the overall need for state participation by about one billion euros. For every euro paid to the EU budget, Estonia will receive 2.8 euros over the next seven years. Given the plan for the recovery of the EU economy after the pandemic, the amounts increases to then 3.5 euros per every euro contributed to the EU budget.

Direct subsidies to farmers

All Baltic leaders point out an increase in direct financing to farmers from 66 to 76 percent, and to 80 percent of the average level across the EU by 2027. Estonia will receive 1.35 billion euros for these purposes, which will mark an increase by 35 percent than in the previous period. Lithuania - 400 million euros. From 2022, Baltic farmers will receive 200 euros of subsidies per hectare of cultivated land. The payments will gradually increase to at least 215 euros per hectare by 2027.

Another common Baltic project - Rail Baltica - also received funding. The dream of Estonia, Latvia and Lithuania of fast and environmentally friendly railway communication with Europe will come true, Ratas said. Additional funding for the entire project has increased by 1.56 billion euros at current prices.

The general situation is not encouraging

However, there is not much space for optimism if one looks at the current problems of the EU and the Baltic countries separately. The latter, for example, have to pay their earlier loans given that GDP of all countries will significantly decrease this year.

For example, according to the Ministry of Finance of Estonia, which is the most economically prosperous country in the region, its GDP in 2020 will decrease by seven or nine percent, while budget revenues are expected to be 600 million-1.5 billion euros lower than planned. The ministry is looking for an additional 1.8 billion euros to implement priority measures in the 2021 budget. At the same time, the debt burden on the state will increase in 2021 to 499 million euros (in four years it has increased more than 29 times).

Money is strictly regulated

More importantly, it is impossible to simply spend the EU money on salaries for public employees or pay off the public debt. None of the above-mentioned money can be used for this. 

It is only few areas will be funded: digitization of economy, innovations and green energy. These are very specific areas of reforms that the countries will have to implement and report their achievements to the EU.

In addition, assistance from cohesion funds for the development of poorer regions of the Baltic states will decrease as economic indicators approach the EU average. For Lithuania, this reduction will amount to 24 percent.

Latvia is happy to receive 3.6 euros from EU funds for every contributed euro, but in the previous period it received 4.2 euros. In other words, subsidies may increase in absolute, but not in relative terms.

EU main priorities have changed

The Baltic countries do not yet want to understand that the main priorities of the EU have changed. The European Union no longer pulls up those that lag behind. The main priority of the EU today is not to lag behind the United States and China in the field of artificial intelligence, and become a major economic player. It is unlikely most EU member counties, like the Baltic States, will be able to quickly catch up with this course, if they can do it at all.

Living standards will not get better

The fact that the EU is going to print a lot of money in the next seven years is a good thing, of course. However, in addition to strict accountability for their investment in unpopular areas of public life, there is a risk that only a very small part of it will go into economy. In May, annual deposit balances of European residents were higher than in 2019. This month they grew by 6.4 percent.

This is the fastest growth since 2009, which means that people, who received assistance against the backdrop of the coronavirus pandemic, deposited the money that they received from the state instead of spending it. They did not stipulate the economy. 

It is obvious that businesses in the EU will not rush to create new jobs in anticipation of the second, third, fourth, etc waves of the pandemic. Therefore, the gross domestic product of the Baltic countries may grow with the help of EU subsidies (1-3% of GDP), but the real life of people will not improve.

All the talking about the creation of general welfare states is nothing more than worthless propaganda.

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Many European countries showed higher rates of new COVID-19 cases than the US did at the initial stages of the pandemic, but when the time came to reopen, they were more successful at doing so without triggering a second wave of infections, economists say.

Despite projections forecasting that the American economy will fare better than the European one in the second quarter of 2020, EU economies are likely to recover much quicker in the next year or two, analysts from several prominent financial institutions have suggested. The European economy is expected to lose some 6.4% compared to the projected 5.1% loss for the US this year, but when the time for recovery comes in 2021, Europe is forecasted to see 6.2% growth as opposed to a 2.8% rise for the US economy, according to JPMorgan Chase's estimates.

The greater contraction of EU economies in 2020 is explained by the fact that US states started to reopen their economies earlier and in some cases more aggressively than countries in Europe, meaning they will benefit in the short to middle term. However, the recent surge in registered US COVID-19 cases might undercut these achievements, possibly forcing some states to return to quarantine again. The first signs of this emerged earlier in the week, when the US Labour Department reported that some 1.4 million unemployment claims were filed in seven days amid what is described by some experts as a second wave of infections in the country.

EU states, on the other hand, have managed to reopen while also keeping the rate of new coronavirus infections low, with their key achievement being breaking the "link" between the mobility of its citizens and infections.

"Having been hit hardest it’s pretty impressive that we think that Europe will recover more fully […] They’ve broken that link -- the mobility numbers are going up", Bruce Kasman, a top economist at JPMorgan Chase, stated, stressing the role that contact tracing, masks, and the social distancing regime played in ensuring that the increase in mobility doesn't come at the cost of new infections.

Both the US and the EU have supported domestic demand with economic stimulus for their citizens. Washington adopted a historically large $2 trillion bill during a spike in daily cases back in April, but is set to negotiate an extension to it in the coming week as the bill's effect is wearing off. According to the US Treasury's head, Steven Mnuchin, the new package will feature an additional $1 trillion in aid if adopted by the Congress, while the EU has already negotiated an $860 billion plan to restore the bloc's economies and support consumer spending, which is essential for growth.

The rise in daily new cases has apparently crippled consumer activity in some of the US states that reopened sooner than others, something that is seen as a reaction to the epidemiological situation. Due to this fact and to the different approach to reopening, the EU now has the chance for a "steeper and smoother rebound" than its partner across the Atlantic after the pandemic, despite trailing behind the US for most of the last three decades in terms of economic growth, a Goldman Sachs expert believes.

 

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What Europe Can Learn from Scotland in Fighting the Pandemic

Global health expert and government adviser Devi Sridhar explains Scotland's ambitious “zero COVID” strategy, which aims to completely eliminate the virus within the country’s borders. She argues that the plan should also be applied to the rest of Europe.

Sridhar, 36, is a professor of global public health at the University of Edinburgh and an adviser to the Scottish government in the fight against the COVID-19 pandemic. She is currently working on a new book in which she analyses why countries such as the United States and the United Kingdom failed in the fight against the coronavirus and explains how we can better protect ourselves in the next pandemic. Its working title: "Preventable: The Politics of Pandemics and How to Stop the Next One.”

DER SPIEGEL: Professor Sridhar, when did it hit you that this virus that was spreading in China was dangerous? 

Sridhar: I can actually tell you the day. It was January 24th, when I read a clinical paper in The Lancet in which doctors from Wuhan described what an infection with this novel coronavirus actually meant for those who were ill, based on 41 hospitalized patients. Half of the hospitalized patients developed shortness of breath, one third had to be admitted to intensive care, and 15 percent died. For me it was clear at that point that we had to do everything to stop this virus. 

DER SPIEGEL: Did you suspect at that time that the world was facing a pandemic? 

Sridhar: It was crystal clear that the way this virus was spreading -- via droplet infection -- is probably one of the worst ways it could, and that it would be very hard to stop. I was lying awake in bed and had that deeply unsettling feeling that the world was going to change profoundly, and that there was probably no good way through this. I was sure at that point that the novel coronavirus was a long-term problem that was not going to go away in a matter of weeks or months. 

DER SPIEGEL: You are not a virologist or epidemiologist, but rather a coronavirus expert whose field of expertise is "global health governance.” What is it that you do? 

Sridhar: Virologists, immunologists, epidemiologists, clinicians, pharmacologists, they all figure out what to do in this pandemic. My task is then to find out how best to implement these measures. It’s about leadership, strategy, logistics, financing and the structures of delivering public health. How do you convince people to wear face coverings and practice social distancing? How do you get governments to work together in fighting this virus? How do you get the right partners at the table? What is good leadership? Often it is quite clear what should be done. But to actually do it is horribly difficult. I am doing my best to help with this. 

DER SPIEGEL: You are one of the coronavirus advisers to Nicola Sturgeon’s government in Scotland. Your strategy is "zero COVID." What does this mean?  

Sridhar: We want to ensure that there are no more COVID-19 cases in Scotland. We want to stop the transmission of the virus entirely. And the strategy to do that is not very difficult: You leave the lockdown measures in place until the number of cases is extremely low, in the single digits, then you carefully release the lockdown, step by step, while testing a lot, tracking down and isolating contacts, and making face masks compulsory in shops and on public transport. Scotland has also decided not to reopen schools until after the summer holidays. Now we are almost there. There are now only about 10 new cases a day - while in neighboring England there are still more than 500.  

DER SPIEGEL: So, Scotland is following in the footsteps of New Zealand? 

Sridhar: That's what we are trying to do. I think this is the fastest way to get normal life back for people, with open schools, concerts, weddings and football matches. It’s the best way to get the domestic economy going again and to stabilize the health services. But you really need to keep cases close to zero for this. 

 

Read more:

https://www.spiegel.de/international/europe/what-europe-can-learn-from-scotland-in-fighting-the-pandemic-a-43c59573-f8f1-489e-ba4b-269974a73eee