New EU package marks entry into European transfer union

After tough negotiations, the new EU Corona aid package is ready. Through a complex mix of transfers and loans, the EU countries are to receive funds amounting to € 750 billion in the coming years. The main objectives are to secure the future and to provide solidarity-based assistance in the wake of the Corona crisis. "Reality is less prosaic, however. As the current decisions clearly show, it is less about balancing out genuine corona burdens and more about introducing a financial transfer system in Europe," says Dr. Heinz-Werner Rapp, founder and head of the FERI Cognitive Finance Institute. Earlier forecasts of the FERI Institute on the future of the EU as a "fragile transfer union" would thus be clearly confirmed.

Structural problems of the euro zone are making themselves felt

The Corona pandemic, he said, had hit Italy and Spain, the very countries that had been experiencing serious problems for years within the framework of the European Monetary Union (EMU), hard. Italy, in particular, is currently severely affected and urgently needs new money. This is all the more worrying as the ECB has been providing targeted support to problem countries such as Italy for years through massive bond purchases. Not least, the current picture of TARGET2 balances, which have risen to historic highs, reflects massive tensions in the EMU. "As a result of the corona crisis, old EMU fault lines are coming back with full force, which have never really been resolved, but only covered with new money," according to the assessment of the FERI Cognitive Finance Institute.

Hidden objectives of the Corona Aid Fund

The EU bureaucracy has recently raised great expectations regarding the Corona aid fund. These ranged from the "reconstruction" of Europe to the promotion of innovative industries. However, the promised financial means were not available, but had to be collected in the future through new EU taxes. The structure, objectives and structure of the new EU financial pot had remained nebulous from the outset, which is why the fierce resistance of individual EU countries ("Thrifty Four") to the plan is easily understandable. In particular, the criteria for the distribution of financial aid are unmasking: not the CoViD19 damage that actually occurred in 2020, but rather blanket economic data from earlier years (2015-2019) served as the central distribution key for aid funds. "This point reveals the true objective of the Corona Aid Fund: ultimately, it serves as a cheap narrative in order to be able to direct massive financial transfers to the weak countries of the EU again - a few years after the euro crisis. Once again, the EU is thus concealing the true extent of its problems, to the point of deliberately misleading European voters and taxpayers", according to Rapp's analysis. Previous forecasts by the FERI Cognitive Finance Institute, according to which EMU would have to mutate into a "fragile transfer union" within a short period of time due to unresolved structural problems, have thus been clearly confirmed.

Since 2018, the FERI Cognitive Finance Institute has analysed the serious structural problems of EMU in several papers. These studies are available in our Content Center.