Page 36 - bneMag bne_December 2020_20201201

36 I Cover story bne December 2020
Southeast Europe’s EU members to get biggest boost from next budget and recovery funds
Clare Nuttall in Glasgow
Member states from Southeast Europe are set to be the greatest beneficiaries from the substantial EU funding planned through the next seven-year budget and the NextGenerationEU initiative, supporting their recovery from the coronacrisis and enabling investments into areas such as physical and digital infrastructure that are crucial for attracting further investment.
Due to the veto currently being exercised by two EU members, Hungary and Poland, the package has not yet been passed. It is planned to comprise the
EU long-term budget for 2021-27 amounting to €1.1 trillion together with the €750bn NextGenerationEU initiative; the two combined will make up the largest stimulus package ever financed through the EU budget, totalling €1.85 trillion. According to EU officials, the package is aimed
at helping to rebuild the bloc post- COVID-19 as a “greener, more digital and more resilient Europe”.
As the poorer EU members (with
some exceptions), the newer members from Central and especially Southeast Europe are expected to benefit the most compared to the size of their economies.
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Over the next two years alone, countries EU support is forecast to reach 11% of GDP in Croatia – one of the worst hit countries in the bloc by the coronacrisis thanks to its large tourism sector – and 10% in Bulgaria. Greece and Portugal, both tourism-dependent “old EU” countries, plus Latvia, Romania and Slovakia will also be among the top beneficiaries in 2021-22, according
to analysis by the Vienna Institute
for International Economic Studies (wiiw). This will help them through the remaining months of the pandemic – likely to be under heavy restrictions and partial lockdowns for much of
the time – and into recovery once large-scale vaccination is underway.
“We think that for the EU member states [of emerging Europe], available of
fiscal space will not be an issue, as they have few problems borrowing money
in the markets due to their good credit ratings,” said wiiw economist Valery Astrov in a webinar on November 12. “The EU member states will also receive strong support under the NextGenera- tionEU programme. A key ingredient is the EU Recovery and Resilience Facility. According to the already planned alloca- tions to individual countries, the funds most of the East European countries
are expected to receive from the EU are rather high in relation to their GDP.”
On the other hand, adds Astrov, for their neighbours outside the EU, in some of the Western Balkan countries as well as Ukraine and Moldova, “fiscal policy space may be a problem, [as] some of these countries already have high public debt to GDP ratios.”
In the longer term, Bulgaria and Croatia are also set to be the top beneficiaries of EU funding over the seven-year budget period.
Tim Umberger, deputy head of Eastern Europe investments at East Capital, notes that Southeast Europe will be the key beneficiary of the EU Recovery Fund and the EU 2021-2027 budget thanks
to the size of the funds, the timing and the strong multiplier effects. “In terms of size ... the combined EU Recovery Fund and previously communicated EU Cohesion Funds for 2021-2027
are massive,” wrote Umberger in a comment for bne IntelliNews.
"Bulgaria and Croatia will receive funding equivalent to 35% of their 2019 GDP, while Greece, Romania and Slovenia will get support amounting to