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LGT Navigator: European Commission wants to increase EU budget in the fight against the Corona crisis

May 28, 2020

After months of disagreement, the European Commission presented its proposal for the EU budget for the years 2021 to 2027. The new budget amounts to EUR 1.1 trn. It aims to mitigate the consequences of the corona crisis, but is also intended to provide impetus for climate protection and digitization and intends to advance the fiscal integration of the member states. The European Commission is also advocating a EUR 750 billion reconstruction fund.

Coronavirus

“This is Europe's moment,” said Commission President Ursula von der Leyen in the EU Parliament and advocated an expansion of the central EU budget before parliamentarians. To finance the additional expenditure, the commission president proposed a number of new EU revenue sources, such as emission papers, a carbon dioxide border tax and a digital tax.

The European Union had recently decided on credit aid of EUR 540 bn, igniting resistance from certain member states. Together with the EUR 750 bn reconstruction fund and the increased budget of EUR 1.1 trn, the union's corona measures would now amount to EUR 2.4 trn. The European markets reacted positively: The Euro Stoxx 50 Index has gained +5% since the beginning of the week.

Lagarde buries hope for mild economic downturn

ECB President Christine Lagarde shared the latest estimates for the 2020 GDP of the euro area on Wednesday. Against previous assumptions that expected a fall in GDP between -5% and -12%, the latest numbers suggest a drop of at least -8%. Already in the first quarter the euro zone faced a record decline in GDP of -3.8%. For the current quarter, however, experts expect an even deeper drop between -10% and -20%. Meanwhile, France announced a historical contraction of -20% in the second quarter alone.

US labor market: unemployment still rising

The US Department of Labor will release its weekly report on unemployment claims this afternoon. Another new record high is expected in mid-May, although the number of new weekly applications is expected to drop from 2.4 million to 2.1 million according to market expectations. The report is a reliable and fast indicator of how quickly the employment situation will ease again after economic activity in the USA was cut back in mid-March in the wake of the Covid-19 measures. Although many shops have now reopened, this is not yet reflected in the unemployment figures.

Economic Indicators May 28

MEZ Country Indicator Last
11:00 Euro area Consumer confidence -18.8
14:00 Germany Consumer Price Index (year-on-year) 0.9%
14:30 USA Initial jobless claims 2 438 000

 

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: David Wolf, +41 44 250 83 48, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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