EU Leaders Reached a Historic Stimulus Agreement

Early Tuesday morning, EU leaders reached a historic stimulus agreement.

EU Reaches Historic Stimulus Agreement (1)
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Early Tuesday morning, EU leaders reached a historic stimulus agreement

The leaders of the 27 countries  negotiated the terms of the €750 billion ($859 billion) bailout fund, which will be paid through a joint loan.

  • The leaders of the 27 countries negotiated the terms of the €750 billion ($859 billion) bailout fund.
  • The agreement stipulates that 30 per cent of the 2021-27 budget should be spent on climate protection.
  • According to investment analysts, the EU needs 2.4 trillion euros to achieve its climate goals.
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In addition, a budget of €1.1 trillion 2021-2027 was approved to defeat the recession. In response, the Pan-European STOXX 600 index rose 1.1%.

It is noteworthy that the pre-agreement discussions reflected deep divisions within Europe. A group of five rich and small northern European nations, including Austria, Denmark, Finland, the Netherlands and Sweden, created the “Frugal Five”. 

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They put more pressure on conditional loans than on subsidies to help the union’s economically struggling countries.

Significantly, Germany did not join the frugal five, and recently adopted a cost-oriented attitude.

The faction erupted on Sunday night when French President Emmanuel Macron  lost his temper with frugal five people. He was joined by Polish Prime Minister  Mateusz Morawiecki, who branded them “stingy, arrogant governments.”

Agree, however, that the agreement must now be passed by the European Parliament, and then approved by each of the 27 members. According to economists, the money will not reach the real economy until the middle of next year.

For climate enthusiasts, this deal is a mixed bag. The agreement stipulates that 30 per cent of the 2021-27 budget should be spent on climate protection. It also guides that all costs should contribute to emissions reduction.

This amount is less than activists expected.

In many international rankings, the EU has shown moderate performance in climate change preparation. However, the new budget does not provide adequate climate spending.

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According to investment analysts, the EU needs 2.4 trillion euros to achieve its climate goals. Considering its weakness in digital technology compared to the US and China, the EU needs to maintain its climate leadership to stay competitive.

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