EU leaders’ agreement on the recovery fund and the multi-annual EU budget is good news for the Czech economy, analysts are saying following the EU summit.
Although the promised money will not affect the development of the Czech economy this year, according to economists, it still equates to significant aid totaling 11 percent of the Czech GDP.
“The approval of the agreement and the EU budget for the next period is positive news for the domestic economy, as the total amount of money allocated to the Czech Republic will be higher than proposed in the original plan,” said ING Bank’s chief economist Jakub Seidler.
However, he pointed out that the money from the recovery fund will not be available until January next year, so it will not show in the economy until the middle of next year at the earliest.
According to Deloitte’s chief economist for the Czech Republic, David Marek, the adoption of the recovery fund, albeit in a compromised form, is essential for Czechia.
“For the Czech economy, it is fundamental that thanks to this fund, the recovery of European economies can be faster and more sustainable,” he said.
“A joint approach is much better than uncoordinated measures that favor companies from certain countries. It would be a great pity and economic loss not to take advantage of this opportunity, but we must have meaningful and smart investment projects ready,” said Raiffeisenbank Bank’s Chief Economist Helena Horská.
According to Natland analyst Petr Bartoň, first and foremost, the agreement aims to rescue the euro currency.
“As economists have warned, without budget transfers, sustaining the common currency is difficult after depriving individual countries of the opportunity to remain competitive by adjusting the value of their currency,” commented Bartoň on the approved recovery fund.
Vice-President of the European Parliament and Czech European Commissioner Dita Charanzová also praised the amount of money negotiated for Czechia by Babiš.
“What is on the table now is a good compromise as it is necessary to calm the financial markets and show that Europe can pull together in difficult times,” said Charanzová.
“It is fair to say that Czechia has improved in terms of the allocation key and also negotiated more on cohesion policy, for which it will get an additional €27 billion. Besides, our position has improved by 78 billion korunas (€2.95 billion) compared to the original proposal of the European Commission. That’s a lot,” added Charanzová.
After four days of negotiating, the EU leaders agreed that from January, the EU countries could start drawing €750 billion from the recovery fund. The Czech Republic will receive €8.7 billion in subsidies, which Prime Minister Andrej Babiš considers a success.
The money to help the European economies will increase the EU budget for the period 2021-2027 to more than €1.8 trillion. In the next seven years, the Czech Republic could draw up to €35.7 billion from the EU budget, money from the recovery fund included. That is almost €4 billion more compared to the current seven-year budget.
Title image: From left, European Council President Charles Michel, Slovakia’s Prime Minister Igor Matovic, Hungary’s Prime Minister Viktor Orban, Poland’s Prime Minister Mateusz Morawiecki and Czech Republic’s Prime Minister Andrej Babis meet on the sidelines of an EU summit at the European Council building in Brussels, Sunday, July 19, 2020. (Francois Walschaerts, Pool Photo via AP)