Perspectives 2020-2021 Public Sector

Citi Perspectives for the Public Sector 54 55 Policymakers in Europe Take Action to Secure the Post- COVID Recovery Policymakers in Europe Take Action to Secure the Post-COVID Recovery S ince the beginning of the year, the health pandemic has, understandably, been the primary focus of policymakers throughout the world. We would share the view that, beyond the direct, dramatic and often tragic impact on human health and economies, COVID-19 has accelerated a number of existing trends that will determine the future of Europe and beyond. Moreover, while we are still in the storm, not yet able to tame the invisible foe, very real and understandable COVID-19 fears mask and distract from some major geopolitical developments. In that sense, and as an aside, read any polling on voter sentiment with extreme caution! In Europe, after a shaky start with, for example, some borders closed between EU Member States, the response to COVID-19 has become more coordinated. The renewed sense of solidarity culminated in July when the European Council reached a historic agreement for a one-time €750 billion recovery fund, known as NextGenerationEU in Brussels circles. For the first time, the EU will finance grants and loans to Member States by borrowing from capital markets. Reflecting the political significance of this agreement, the German Finance Minister has described the recovery fund as the start of a fiscal union, ‘a sort of Hamiltonian moment’. Certainly, the Commission Proposal sets out a number of potential EU ‘federal’ taxes, known as EU Own Resources. Whatever is ultimately agreed – decisions will not be required this year – the European Commission tapping the capital markets on such a scale will have political consequences. For many European politicians, the recovery fund is as an expression of a willingness of the European Union to do things differently, even, some have suggested, an expression of the EU’s willingness to be a more assertive geopolitical actor. Looking a little more closely at the detail, the biggest component of the fund is the €672.5 billion Recovery & Resilience Facility (RRF), made up of €312.5 billion in grants and €360 billion in loans. As you might imagine, the size of the fund, as well as the split between grants and loans, were two of the biggest elements in the negotiations between EU Member States. The conditions attached to receiving the money also raised further debate, including ‘rule of law’ conditions, which proved most controversial. 54 We would share the view that, beyond the direct, dramatic and often tragic impact on human health and economies, COVID-19 has accelerated a number of existing trends that will determine the future of Europe and beyond. Georgi Yordanov Head of Public Sector Europe, Citi Howard Miller Global Government Affairs EMEA, Citi Guy Peters Public Sector Group EMEA, Citi