Countries are different but share a common goal and spirit. Could it be that the economic forces within the EU are finally building their own collective “Eurovision”? Forstrong Global CEO and CIO Tyler Mordy believes it certainly is as COVID-19 drives the region’s move away from austerity to fiscal integration.
The EU co-funded Facility for Reconstruction and Resilience (RFF) is valued at US $ 672 billion and will run for six years between 2021 and 2026. In particular, it is the result of an unprecedented agreement between EU heads of state and government to jointly borrow money and fuel the necessary spending to overcome the effects of the pandemic.
Mordy said: “The pandemic has allowed the EU to break two major taboos: explicit tax transfers between countries and the large-scale joint EU bond issuance, which required a larger EU budget for the first time since 1988 common fiscal union. “
“Looking to the future, the political signal is clear. The market used to worry about the eurozone breakup, but the line of sight for the next three to five years is a steady road to integration, more growth-oriented fiscal policies and a departure from austerity. Jean Monnet, founding father of the EU, said: Europe will get into crisis. He was right.”
Forstrong’s macro analysis views the geopolitical world as tripolar with the US, emerging Asia, and Europe being the main totems. Mordy told WP the most interesting question right now is whether the COVID crisis will bring meaningful reforms out of this slowly growing, secularly stagnant, new normal world. What will be the enduring legacy of the virus?