Irish Examiner View: Grim figures but recovery close at hand

European Union leaders are expected to again defer a final decision tomorrow on how to finance post-pandemic economic rejuvenation.
Irish Examiner View: Grim figures but recovery close at hand
EU finance Ministers meeting in Brussels in February. Photo: Enzo Zucchi/PA

European Union leaders are expected to again defer a final decision tomorrow on how to finance post-pandemic economic rejuvenation.

The 27 national leaders have already clashed on what has been described as a new Marshall Plan.

The stumbling block is around solidarity and trust, essential elements in any real cooperative movement. Southern countries, with whom we are aligned, want rescue funds raised under the EU flag.

However, northern states, particularly the Dutch, argue this obligation falls to national governments.

Unless this impasse is resolved in a way that shows the EU is a real union, happy to support and trust all its members then some disaffected states, especially Italy, may decide to follow Britain’s thanks-and-goodnight lead.

Alert to that threat, one on a par with the pandemic, Chancellor Angela Merkel, on Monday, indicated Germany’s willingness to finance recovery through a bigger EU budget and joint debt via the Commission.

Details are unfinalised but the scale of the intervention will be unprecedented. Spain has called for a warchest of €1.5trn, around three times earlier estimates and on a par with America’s recent intervention in Wall Street.

The EC fears coronavirus could cut EU economic output by 10% and in response hopes to increase cohesion funds and the development funds supported by wealthy EU countries to help weaker peers catch up.

The EC plans to present an updated draft of the 2021-27 budget next Wednesday.

It would have to be approved by all the 27 national capitals to take effect from next year.

As toppling oil prices show, the uncertainties of the day make this a daunting challenge, one that certainly demands almost unquestioning EU solidarity.

Figures offered by the Department of Finance yesterday show that we will need the support of any Marshall Plan 2020 as they paint a grim, pessimistic picture.

The only positive line in them is that the pandemic’s economic impact is expected to be short-lived and that the recovery, once it begins, will take but a season or two to come to fruition.

The headline figures could well evolve into catastrophe unless they are managed properly — or at least as well as they might be in these quicksand days.

This, no matter how the last of the cake is divided, will involve pain and sacrifice.

The projection shows that the budget surplus of 2019 plunges to a deficit of €23bn this year and hits €13.8bn next year.

Unemployment is expected to cross the 20% threshold this summer which, by any yardstick, signals social failure on a grand scale. GDP is expected to slow slide by 10.5% but recover by 6% in 2021; GNP will drop by 11.7% but grow by over 7% in 2021.

In a measured understatement the Department points out that the economy has undergone “fundamental change” in a matter of weeks. “Swathes of economic activity have temporarily come to an effective standstill,” it says.

There are, inevitably, many possible responses to predictions as grim as these. Fear and anger, though justified, will only exacerbate a difficult situation.

Just as is the case with the EU, solidarity and loyalty in pursuit of a common purpose seem the best options especially as these cold figures tell the stories of the lives we face for the next while.

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