EU rescue package: Politically correct but financially risky

After many marathon negotiations, finance ministers of the 27 EU member states finally reached a financial rescue package worth EUR500 billion aiming at supporting EU member states deal with the coronavirus pandemic. It is one of some answers of the EU to the devastation the pandemic has caused. The package includes hundreds of billions in loans to businesses and credit for EU governments to cushion the force of the pandemic blows.

EU finance ministers have reached a financial rescue package worth EUR500 billion. Photo: Reuters

It is the EU's another sign of life in the context of the rapid spread of the pandemic across the continent. The EU already acknowledged that this pandemic is the most severe crisis in its history. But until now, the bloc has acted very little and ineffectively against the pandemic and has proved itself to be inefficient and not helpful for the member states in their combat against the pandemic in their territories. The member states all have so far had to rely on themselves in order to protect their people. Until now, the EU has failed to take the leading role, to coordinate efforts and actions, to bundle resources of all member states and to prove itself capable of acting in crisis times like the present pandemic.

Therefore, the agreement reached on the financial rescue package is very positive and encouraging for the EU. It is politically correct and necessary because it demonstrated that the EU can still achieve unity within the union and that 27 member states can still cooperate with each other. It preserved chances and opportunities for the EU to play its role in steering the union and continent through the rough pandemic winds and storms.

But this package implies many risks for the EU. First, EUR500 billion does not mean much for the 27 EU member states. The amount is far and away from being enough to meet the needs of the EU member states in dealing with the pandemic and in preparing for the time after it. That would imply that the EU couldn't avoid a scenario in the very near future in which it has to inject more funding into it. Again and again like pouring water into bottomless pits.

The EU member states are already given the green light to increase their public debts and to deliberately raise their budget deficits, unless they do so in response to the pandemic, because new public debts and higher budget deficits would be legalized by this financial rescue package of the EU.

The EU member states are aware of those financial and financial-political risks. But now the EU accepts them because the bloc thinks and acts according to the philosophy "The end justifies the means."

Disclaimer: The views expressed by Ambassador Tran Duc Mau are of his own and do not necessarily reflect the views of Hanoitimes.