After several intensive days, the 27 members of the European Union finally reached a Solomon agreement on the restructuring fund. It is an economic stimulus package to save the economy. We are talking about 750 billion euros that will flow into the economy as an immediate measure. An intervention that many consider necessary, but some consider disadvantageous. However, the background is already a fact. The politicians have reached an agreement. However, We analyze the key points of the fund.
It is necessary? Yes, this fund is necessary in many ways. First, because unemployment is skyrocketing and many families need a hand. D.Letting millions of people sink into misery in the name of austerity measures is just going too far. Discipline is one thing, but it’s easy to confuse discipline with pettiness. Failure to intervene at this time would not be financial wisdom, it would be cruel. And ironically disadvantageous for the economy.
Giving two hamburgers to an overweight man who has already eaten three is not the same thing as giving a glass of milk to a malnourished person.or. As libertarian as you are, you have to understand the difference. Although healing alone is always an option, conservatives also go to the doctor if they are sick. There is medicine for every moment. If a medicine is misused at any time, it does not mean that the medicine is bad at all times. In other words, While government intervention in the economy can sometimes be excessive and harmful, intervention is required in some cases.
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In addition to helping the unemployed, the fund is necessary in this case to increase local demand. It is not the same thing to spend more money on an economy like Venezuela or Zimbabwe than an economy that is going through a serious deflationary scenario. We have to be smart enough to forget dogmas for a moment and realize that deflation needs to be tackled. The goal in this case is not inflation, but balance. Money is injected so as not to sink the garden with water, but to make the desert bloom.
The fund is also necessary for political reasons. That is what society claims. At this point it would be political suicide not to take this fund because the Europeans would not forgive their rulers. Too many economists (academics and amateurs) have all too often forgotten that business is not just a technical matter. Socio-political elements play a role in all macroeconomic decisions.
In other words, an economic decision may be perfect from a technical and theoretical point of view, but without public support, we will only have a major governance crisis. AND, Ironically, such crises are bad for the economy. Nobody is right with the right measure, but the streets are burning.
If you sit in front of the keyboard now, you can easily criticize all measures taken. But fighting the lions in the arena of the Colosseum is something completely different. In the real world, pressure comes from all sides and you have to be more pragmatic than dogmatic. Commentators and columnists have it easy. Because the text supports everything. To be able to be the owners of our truth, but without responsibility. We can criticize and feel like the kings of the world while others do the hard work. It’s easy to put the world together on Twitter. The difficult thing is to put them together in the real world. You can’t think of the absolute in real life. You have to make concessions.
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The people who fight in the arena live in a completely different world than the world of the people in the box. That is why I think this agreement is really brilliant. And it’s brilliant because nobody got what they wanted. In other words, they were all partially unhappy. Which means it was a success. A miracle indeed. The Europeans have chosen a focus in almost everything. The extremes were the big losers, and the agreement is largely supported. He hasn’t won any austerity measures, but he hasn’t won any waste either. The north has not won, but the south has not won either. Common sense gained. Neither the right nor the left accepted the trophy. We are facing a collective victory. The unit won.
This crisis is so big that the 750 billion euros will not cause inflation or devaluation for the simple reason that deflation is too big. In other words, the world’s libertarians could stop crying for a problem that doesn’t exist. Turn the page. Wipe away your tears. Emission is not inflation. Assumptions and conjectures are not evidence. You have to go to the dates. This fund will not depreciate the euro. Because it was designed with great ingenuity. Here we are in front of a Picasso. A real poem!
This fund is not invested with inorganic money. It is financed by issuing bonds. And these bonds are paid with new taxes. Sectors such as non-recyclable plastics are subject to new taxes. That said, it won’t be new money in itself, but it is resources that come from new sources. Basically, it is a redistribution. No pressure from gross money. It is not a purely American monetary policy. I mean, it’s not a rain of money. It is the channeling of the water of a river. Wala!
It is also not a blank check. That is conditional money. Just under half are loans (48%) and the rest (52%) are grants. And structural changes will be required. The 750 billion is the fair amount. Larger than the frugal club wanted, but much less than the Mediterranean demanded. And the amount is not so high relative to European GDP (less than 11%). And it’s big enough that it can have an impact.
The fund will run gradually. From autumn it will be paid out gradually over the next 2 years. In other words, they are progressive impulses that give the economy time to adjust. In other words, it’s not a violent arrival fund that distorts everything. The measure is designed with great caution.
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Spain receives 140 billion euros, of which 72.7 billion are direct aid and the rest are loans. Spain is the second beneficiary after Italy. The funny thing is that this fund doesn’t go directly to large companies. So this is not a plan like the American plans that benefit large companies first, and almost everything goes to the financial markets, widening the inequality gap. In this sense, this fund is very special. The corporate rescue fund has been canceled. This is The libertarian dream of “temporary pain” to eliminate bad actors will partially come true.
The nice thing about this agreement is that the frugal club and the southern bloc have managed to consolidate two diametrically opposed visions in a unified and trauma-free agreement. In a fragmented European Union, a unified plan with a surprising majority stake was obtained. It is a real political and institutional triumph. Europe has a future. Liquidity will certainly help fight deflation and unemployment. However, this new entity will also have a positive economic impact, as the institutional strength of this agreement will lift sentiment and build confidence. The European Union is stronger today than yesterday. Leave the crying, libertarian friends! This is not a time for dogmas. The ninth symphony is playing! The hymn of happiness! Long live Beethoven!