FIRST, SOME SOLID INTEL:
EU Corona Spending: Finally, an agreement?
After various discussions over the last few weeks (guess what: we reported) Commission President Ursula von der Leyen came up with a proposal for the EU Recovery Fund and the new EU budget: €500 billion borrowed by the Commission, but distributed as guarantees via the EU budget, another €250 billion given as credit to the Member States in need, amounting to a total of €750 billion. Additionally, the EU budget will be extended to a total of €1.1 trillion. Lastly, there are the already agreed to Corona-reaction-funds amounting to €540 billion. Adding private investments stipulated by the public spending, the Commission calculates €3.1 trillion.
The money is supposed to be distributed according to the spending areas of the EU budget, focusing on different areas like cohesion, agriculture, health, digitalization and so on. However, the Commission says, the distribution will account for the fact that the “twin transitions to a green and digital Europe remain the defining challenges of this generation.”
The new budget and the recovery fund appear a bit like the perfect all-in-one solution: recover from the crisis while fostering the big challenges of the future by simultaneously strengthening European integration and social justice between Member States. The only hurdle is:
ALL Member States have to agree. And that is still tbd.
Ping us for more details on the funds’ distribution.
Recovery Fund: Digital Tax coming?
Whatever the agreed upon recovery fund will look like in the end, it will need to be financed. So far, the EU is mainly financed by its members and has comparably small resources of their own. Now the Commissions’ proposal raises the question: “Well, if we are the ones borrowing money on the capital markets, why shouldn’t we have our own revenue streams?” Different proposals like a carbon border tax will be considered, but one stands out: the so-called “Digital Tax”.
The rationale: Big tech companies are making a lot of money in the EU while paying nearly zero taxes on that income to the EU. International discussions in the OECD and between the G20 states are ongoing, but do not seem like they would deliver fast results. So it is conceivable that the EU should come up with its own approach for a minimum tax on the income of big tech companies in the near future. And this will be another source of EU-US tensions.
German Recovery Program – Summer Edition: Discussion Next Week
Next week in Germany, the governing parties of CDU and SPD will decide on a stimulus package worth €100 billion. The volume of the package has been agreed upon, the ways of distribution have not. This is the finest hour for Germany’s lobbyists, the great show for public affairs and government relations. It is reported that Finance Minister Olaf Scholz (SPD) has over 350 letters on his desk from different industries asking for help. One of the most controversial discussions is a scrapping bonus for electric and “clean” diesel/gas cars, advertised by the powerful German auto industry. The leading economic experts in Germany warn the government that to give help to a single industry would put into play broader measures like loss carrybacks. And they are not alone: Candidate for CDU party leadership (and maaaybeee for chancellor 2021?!) Friedrich Merz agrees that state aid is only sensible if it supports the transformation towards a future-proof, globally competitive German and European industry. Short-term support increases consumer demand but won’t help the economy in the long run. The outcome is not only relevant for economic recovery but will give an impression of which lobby groups are currently the most influential ones.
Ping us on Wednesday for more, as these discussions might take the whole night.
For an update on our VIP virologist and yet another German recovery package, check out the PDF:
WHAT’S ON OUR MINDS
The subtle art of not giving a dime
Full of hope that Merkel would lead us into overcoming the crisis by summer, I have invested in vacation stocks since April.
As an entrepreneur I welcomed the positiveness in the public and in politics in May. And it seemed to have payed off: Those of you owning some vacation stock might understand when on Monday I felt like:
Just as I planned on having a glass of champagne to greet the prosperous month of June, bad news for the summer hit: The Dutch have closed their beaches for day-tourists, Germany’s TUI (biggest tour operator on the globe and major hotel group) cancelled all British bookings in June and stock-markets plummeted because of Hong Kong.
Overnight the dogs of anxiety were in my face again:
„Sell in May and go away but remember to come back in September”, said investors of the City of London in the 1930’s when they sold their stocks before retreating to their summer mansions until September. However, recovering our economy will not work with retreating until September. So today I will only invest in a great weekend: Sell Empty my mind from all political and economic struggle for a few days and see what inspiration Pentecost will bring 2020!