The United States Senate has approved President Joe Biden’s $1.9 trillion coronavirus recovery plan, more than twice the size of Barack Obama’s 2009 stimulus.
With the exception of a $15 hourly minimum wage, the soon-to-be-law includes nearly all the provisions Biden had called for, including additional spending on health care, extended unemployment insurance (if cut by $100 per week from the original version) and rental assistance. For detail, check out my post about the bill from January.
The EU could face its own version of a government shutdown in January if Hungary and Poland veto the bloc’s seven-year budget and coronavirus recovery fund, worth a combined €1.8 trillion, at this week’s European Council.
The far-right governments of the two countries oppose the introduction of a rule-of-law conditionality for EU subsidies. Hungarian and Polish voters, and other European countries, favor the proposal.
If leaders don’t find a solution this Thursday and Friday, the European Parliament would not have time to ratify the spending plans before the new year. The council isn’t due to meet again until March. Read more “EU “Government Shutdown” Looms”
Spain’s left-wing government has proposed raising public spending by 10 percent next year to cope with the effects of coronavirus. If approved — the ruling parties do not have a stable majority in Congress — it would be the biggest budget in Spanish history.
Health spending would rise 150 percent, or €3.1 billion. In addition, €2.4 billion would be set aside to prop up primary care and buy vaccines. Another €700 million, drawn from the EU’s €750 billion coronavirus recovery fund, would go to elderly care.
Spain qualifies for around €70 billion in EU grants and €70 billion in loans. It is not expected to make use of the loans, given that it can still borrow affordably on its own.
The Netherlands’ ruling center-right coalition unveiled an expansionary budget on Tuesday, when King Willem-Alexander read out his annual speech from the throne to set out the government’s priorities for the next fiscal year.
Whereas the Dutch government, then also led by Mark Rutte, raised taxes and cut public spending during the last economic crisis to keep its budget deficit under the EU’s 3-percent ceiling, it now argues against austerity and is borrowing the equivalent of 7.2 percent of GDP (down from an earlier estimate of 8.7 percent).
Rutte argues the savings made in previous years allow the government to avoid cuts this time.
France has unveiled a $100 billion stimulus program, worth 4 percent of GDP over two years, to help its economy recover from the effects of COVID-19.
The money is split almost equally between support for businesses, investments in the green economy, and health and social programs. It comes on top of the €460 billion France has spent on exemptions from social charges, furlough subsidies and soft loans to keep businesses afloat.
With the Brexit transition period ending in just four months, concern is rising that the United Kingdom might crash out of the EU’s common market and customs regime without a deal.
Not everyone is worried. Prime Minister Boris Johnson’s predecessor, Theresa May, argued it “wouldn’t be the end of the world” if Britain left without a deal. Right-wing economists are looking forward to setting “attractive tax rates” once the United Kingdom is free of the EU’s grasp. The UK, they believe, could become a “Singapore-on-Thames”, gain a “competitive advantage” over the EU and draw businesses and investment away from continental Europe.
If the German economy does poorly, so will the eurozone’s. A mere .2 percent growth is projected for the first quarter of 2020. This should be a wakeup call to German policymakers.
There are the usual suspects: underdeveloped infrastructure, underinvestment in education, export dependency.
They all stem from Germany’s obsession with surpluses. Revenues generated by exports are not reinjected into the economy. Rather, they sit comfortably in savings accounts. This is the reason for negative interest rates.
Not spending money is one way to get rich. But to grow its economy, or prevent a slowdown, Germany must put its money to work: invest in education, infrastructure and public goods.
Its reluctance to do so affects everyone in the euro area. Germany accounts for nearly 30 percent of the eurozone’s GDP. If Germany spent more at home, it would reduce its current account surplus and increase demand for the products and services of other European nations. Read more “Germany’s Surplus Obsession Hurts the Eurozone”