The scheme\u2019s centrepiece\u00a0\u2014\u00a0\u20ac390bn of grants\u00a0\u2014\u00a0would provide a net benefit worth more than 10 per cent of the pre-crisis Croatian and Bulgarian economies and almost 9 per cent for Greece, the ECB estimated in a research note published on Wednesday.<\/p>\n
Also among the net beneficiaries are Portugal, which will gain 5.4 per cent of its 2019 GDP; Spain with a gain of 3.4 per cent of GDP, and Italy with a gain of 1.9 per cent of GDP.<\/p>\n
The scheme \u201censures stronger macroeconomic support for more vulnerable countries\u201d, the ECB said.<\/p>\n
The heaviest net losers include the \u201cfrugal four\u201d countries that initially opposed the new fund. Austria, Denmark, Sweden and the Netherlands will all lose out on a net basis by nearly 2 per cent of pre-pandemic GDP, as will Germany, according to the central bank\u2019s analysis.<\/p>\n The ECB assessed the benefit each country would derive from the grants after deducting the cost of repaying its share of the extra EU debt needed to fund them.<\/p>\n It noted that although the fund is \u201ca one-off\u201d it \u201ccould also imply lessons for economic and monetary union, which still lacks a permanent fiscal capacity at supranational level for macroeconomic stabilisation in deep crises\u201d.<\/p>\n The EU should consider making the fund a more permanent part of its policymaking arsenal when it restarts talks on its budget rules<\/a>, the ECB said.<\/p>\n The finance raised by the fund will increase the EU\u2019s outstanding debt 15-fold, the ECB estimated.<\/p>\n ECB officials have long argued that the EU should issue a large, commonly guaranteed pool of debt to rival German Bunds in a bid to reduce the bloc\u2019s vulnerability to future national sovereign debt crises.<\/p>\n However, the idea is contentious among conservative policymakers who insist the recovery fund \u2014 dubbed Next Generation EU \u2014 should only be a temporary crisis-fighting tool and worry that some countries may not make efforts to repay EU loans.<\/p>\n Jens Weidmann, president of Germany\u2019s central bank, warned<\/a> this month about the risk of \u201ccreating the impression that debt at the EU level somehow doesn\u2019t count or that it is a way of evading tiresome fiscal rules\u201d. He added that the recovery fund should \u201cremain a clearly defined crisis measure and should not open the door to permanent EU debt\u201d.<\/p>\n But the ECB said: \u201cProvided it is deployed for productive spending and accompanied by growth-enhancing reforms, Next Generation EU would not only help to underpin the recovery but also increase the resilience and growth potential of member state economies.\u201d<\/p>\n It estimated that the overall financial support from the fund would be equal to almost 5 per cent of eurozone gross domestic product.<\/p>\n Economists worry about the longer term financial sustainability of some southern European countries that are expected to vastly increase their budget deficits to fund their response to the coronavirus pandemic. Greece\u2019s debt is expected to rise above 200 per cent of GDP, while Italy is set to exceed 160 per cent and Spain is heading towards 130 per cent.<\/p>\n Fabio Panetta, an ECB executive board member, said in a speech<\/a> on Tuesday that for heavily indebted countries \u201cthe sizeable funding provided at the European level presents a unique opportunity to address concerns of competitiveness and long-term sustainability\u201d.<\/p>\n He added: \u201cGrowth will be the only solution to the accumulation of public and private debt.\u201d<\/p>\n![\"Bar](\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fd6c748xw2pzm8.cloudfront.net%2Fprod%2F235a2460-fce2-11ea-937a-177cabc7c1ea-standard.png?source=google-amp&fit=scale-down&width=500\")
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