The Economist - USA (2020-11-13)

48 Europe The EconomistNovember 14th 2020

1

T

he puffof white smoke came on No-

vember 10th. After months of ill-tem-

pered talks between governments and the

European Parliament—one French mep

even went on hunger strike to protest

against cuts—the two sides at last agreed

on a seven-year budget for the European

Union. Some hurdles remain. Rules must

be thrashed out for running the Recovery

and Resilience Facility (rrf), the centre-

piece of the covid-19 recovery plan agreed

by euleaders in July. (This, along with the

regular budget, makes up an overall €1.8trn

package.) Viktor Orban, Hungary’s prime

minister, is threatening to veto the whole

thing because of rule-of-law conditions at-

tached to the budget. But officials are cau-

tiously optimistic that an end is in sight.

The deal in July empowered the Euro-

pean Commission to borrow €750bn

($886bn) from capital markets and distri-

bute the proceeds, in grants and loans, to

eugovernments over six years according to

specific economic criteria. The plan (see

chart) emerged from a fear that the di-

vergent effects of covid-19 could drive a

permanent wedge between governments.

Its scale sparked talk of a “Hamiltonian

moment”—a watershed for euintegration.

In truth, it may do more than pessimists

had feared, and less than the optimists

hoped.

It has slowly dawned on governments

that the recovery fund—Next Generation

eu(ngeu), to give it its full title—is not

there to prop up short-run demand. Real

money will not start flowing until the sec-

ond half of 2021 at best, by when the recov-

ery should be in full swing. The bulk of the

grants will not be dished out until 2024. In-

stead the commission hopes to use ngeu

to promote its own vision for long-term re-

form. The recovery plans governments

must submit to Brussels next year will have

to identify projects in line with European

priorities. Fully 37% of the spending in the

rrf, for example, should go on climate-

friendly schemes, such as insulating old

buildings, and 20% on digital projects. A

second, related aim is to promote structur-

al reform in member states to lift long-term

growth rates. The commission is quietly

helping governments knock their recovery

plans into shape, and some are struggling.

So far, says an official, they are doing better

on the investment part than on reform.

But Brussels will have its work cut out.

Governments have their own priorities,

and face competing claims on any available

cash. Some, such as Italy, have a less than

stellar record of investing for the long

term. Eastern European countries often

have trouble absorbing eufunds as it is.

The commission itself will face serious

technical and capacity constraints, and

there will be pressure to get the scheme up

and running soon. “You need strong gov-

ernments to implement the changes the

rrfdemands, and you don’t have that in It-

aly and Spain,” says Mujtaba Rahman of the

Eurasia Group, a consultancy.

While they wait for the process to grind

on, governments must keep economies

afloat themselves. Europe has avoided the

mistakes of the early 2010s, when prema-

ture fiscal and monetary tightening trig-

gered a needless double-dip recession.

Funding furlough schemes and other de-

mands could cause average deficits across

the euto swell to 9% of gdpthis year,

helped by a suspension of the eu’s fiscal

rules and the European Central Bank’s ul-

tra-loose monetary policy. Yet some worry

lest governments withdraw stimulus too

soon. Shahin Vallée at the German Council

on Foreign Relations reckons that, stripped

of accounting tricks, the French and Ger-

man draft budgets for 2021 reveal, at best, a

neutral fiscal stance, even as a second covid

wave portends a deeper recession and a

spate of corporate bankruptcies looms.

With the outcome of a suspended fiscal-

rules debate unknown, some governments

may fear racking up debts too quickly.

As for the Hamiltonian moment, in the

long run that will depend in part on wheth-

er talks on eu-wide taxes—“own re-

sources”, in the jargon—on matters like fi-

nancial transactions get anywhere. (A

“roadmap” approved this week does not

commit governments to anything.) A more

pressing question is whether the recovery

fund can be made to work in the first place.

The commission says ngeucould boost eu

output by up to 2% at its peak. But if gov-

ernments pour money into pensions and

public-sector wages rather than electric

cars and 5gnetworks, sceptics in Germany

will be reluctant to see the experiment re-

peated. Success is far from assured, and

Brussels is nervous. But at least meps

should be able to start eating again. 7

BERLIN

The European Union’s €750bn recovery

plan comes one step closer

Europe’s recovery fund

Turn on the spigot

Dividing the pie

Recovery and Resilience

Facility grants, 2021-22

Selected countries, % of 2018 GNI

Sources: European Commission; Eurostat *Forecast

Germany

France

Italy

Spain

Poland

Romania

Portugal

Greece

Bulgaria

Croatia

1086420

-5.6

-9.4

-9.9

-12.4

-3.6

-5.2

-9.3

-9.0

-5.1

-9.6

GDP, 2020*

% decrease on

a year earlier

T

he twin-engine French army helicop-

ter swoops at high speed and low alti-

tude over the arid plains of the Sahel, its

side-mounted machineguns trained on the

ground. A vast expanse spreads out in each

direction, interrupted only by acacia trees

and the occasional herd of goats sent scam-

pering by the helicopter’s roar. It is en route

from the French military base in Gao, cen-

tral Mali, to Ménaka, at the heart of a zone

where a jihadist insurgency last year killed

some 4,800 people.

Arising from the rust-coloured sand,

the French forward base at Ménaka is a

compound of newly built tents and con-

verted containers. Under a searing sun on a

November morning, parachutists and

commandos line up to brief Florence Parly,

the French defence minister, who is visit-

ing from Paris. The soldiers have just con-

ducted an operation code-named Bour-

rasque against jihadists from Islamic State

in the Greater Sahara (isgs) in the plains

and valleys of the Liptako region.

For a month, troops from France, Niger

and Mali, backed by special forces and act-

ing on French and American intelligence,

tracked jihadists. Temperatures inside ar-

moured vehicles were at times sweltering.

Tyres often blew out, and sand snarled up

the mechanics. They killed several dozen

insurgents and seized weapons, motor-

bikes, fuel and food supplies. It was “in-

tense”, says a unit captain, with “violent

encounters” at close range on the ground,

often at night. “We slept when we could.”

The French government first dis-

patched troops in 2013 to halt a jihadist ad-

GAO AND MÉNAKA

France’s thankless yet valuable war against jihadists in the Sahel

France in the Sahel

Mission impossible but necessary