EUROPEAN MONEY JUNKIES

The European Union has suspended its ban on government subsidies to businesses as member nations pledge hundreds of billions of euros to save industries, sustain companies, and pay laid-off workers as the implications of their response to the virus plays out.
France already has promised €45 billion to re-inflate its economy. The Netherlands has announced bold tax exemptions and guarantees to replace up to 90 percent of some laid-off workers’ wages, measures that could top €20 billion by July.
Germany has concocted a €650 billion combination of loans and loan guarantees for businesses but has set no limit on the amount of aid it’s prepared to offer.
Aid pledged so far amounts to 1 percent of Europe’s economic output this year. Additional tax breaks, subsidies, and government guarantees being considered could push the amount well beyond 10 percent of the bloc’s GDP for all of 2020.
Only a modest portion of aid promised thus far will be made as direct payments to businesses or individuals. The figures advertised are, in large part, symbols meant to bolster confidence that the future will bring things right again.
Italy and Spain are less well-off and are pledging more limited aid. Italy is putting together €25 billion in health care spending and mortgage relief and also is delaying tax deadlines. Spain’s government is offering €17 billion that it hopes will leverage at least another €183 billion from other sources.
TREND FORECAST: Generously subsidized recoveries will be somewhat robust in richer countries such as Germany and the Netherlands but will lag in countries farther south. As disparities grow, resentments will put new pressures on the region’s fragile currency union and threaten the future of the European Union itself.