Grant them strength, or loan it: Europe’s historic deal

Hello and welcome to The Intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world. Jihadist violence has long been growing in the Sahel, the continent-wide southern rim of the Sahara Desert. But now the jihadists are spilling into neighboring states staking out trade routes, allying with other insurgents, and exploiting ethnic tensions. The prisons in one of those neighboring states, Burkina Faso, are increasingly crowded as authorities round up suspected jihadists. But thanks to a local charity's work, some inmates are leaving prisons as musical stars with record deals. First up though.

Okay.

Yes.

Well, good morning everyone. We did it.

Today, after the longest European Union summit in two decades, the continent's leaders finally hammered out a deal for a €750 billion coronavirus recovery package.

Europe is strong. Europe is united.

Key to the agreement was something once unthinkable: common debt. For the first time ever, European countries will raise money by selling bonds collectively instead of individually.

These were, of course, difficult negotiations in very difficult times for all Europeans. This is a good deal. This is a strong deal.

As the Council's President, Charles Michel, said, getting the 27 member countries to agree wasn't easy. There were splits between those hardest hit by the outbreak, such as Spain and Italy—

It's a historical moment for Europe.

It's a historical moment for Italy.

And those more concerned about the costs of the recovery plan, the self-described "Frugal Four"— Denmark, Sweden, the Netherlands, and Austria.

We have agreed as frugal countries that we will hold on to a very clear position. But in the small hours of this morning, after concessions were made and compromises reached, Europe opened a new chapter.

So the EU's leaders have agreed a package collectively worth around €1.8 trillion, but there are two separate elements to this.

Tom Nuttall is The Economist's Berlin bureau chief.

The first, worth just over €1 trillion, is the EU's 7-year budget from 2021 to 2027. They have to negotiate this every 7 years, and they've concluded the negotiations on that now. The second part of this, which has been given given the name Next Generation EU. This is the real novel bit because it involves the European Commission for the first time in the EU's history borrowing hundreds of billions of euros on capital markets that will be distributed to member states according to an allocation key which covers things like unemployment rates and GDP per capita, partly in the form of loans that those governments will need to repay, but also in the form of grants which they won't need to repay. And it was that second element, the grants element of this package that was one of the big sticking points for these negotiations at this summit, because it's such a novel thing for the EU to be doing. It's breaking new ground in doing this, and inevitably there were all sorts of concerns that different governments had as they were negotiating the fine print of this deal.

And it was because of those reservations that the negotiations took so long?

Yes, one of the big debates was over just what share of the package should be distributed in the form of grants. France and Germany had originally pushed for a deal that would see €500 billion distributed in grants. After opposition from so-called frugal countries like the Netherlands and Austria, that was whittled down to €390 billion. Another related issue was over the governance of this. How will that money be distributed? And will governments have any control over whether disbursements are made to other governments? This is a huge issue for countries like the Netherlands.

What was in the core of the original text, the system design—

And what they were able to get in the final deal was a so-called emergency brake measure, which means that in extremis, if disbursement is planned to a particular government, then another government that has concerns may hold up that disbursement and force a political discussion over it.

That the Commission being able to put measures on countries when they are clearly in breach on certain issues concerning financial That was something that southern governments aren't particularly happy about, but that's one of the compromises that they needed to make.

But how exactly was the compromise reached? I mean, this was a standoff for days.

Yeah, I mean, it's a standard EU business, and when you're negotiating a very large package like this, that does give you lots of opportunities for trade-offs. Essentially, with the frugals, the price for extracting their concession that you'd have this large element of grants in the package was partly to increase their rebate rebates. You might remember these were originally negotiated by Margaret Thatcher for Britain back in 1984. All four of those countries are now going to receive larger rebates than in the original budget plan. There's also a special concession for the Netherlands. Rotterdam, one of the EU's biggest container ports, the Dutch are now going to be allowed to receive a larger share of customs duties from goods arriving at that port than they were previously supposed to. So, you know, lots of things for people to be unhappy about. But the important thing for summits like this is that every leader is able to go back to their parliaments, go back to their and hold up something and say, this is what I was able to obtain from these fiercely debated 5 days of negotiations. And that's what they've done.

But there was this other issue, certainly one that Dutch Prime Minister Mark Rutte mentioned, around the rule of law and the involvement of Hungary and Poland.

Some people do have concerns over this part of the deal. For years, the EU has been trying to figure out what to do about supposed infringements of rule of law in these countries. It's basically got nowhere. So there was this idea to use money as a weapon because Poland and Hungary both receive a lot of money from the EU budget. There is now some sort of mechanism in this deal so that governments can, as it were, raise a red flag if they consider that disbursements are going to countries who have infringed the rule of law. But the mechanism looks pretty toothless. We'll have to see how that plays out in practice. But both Viktor Orbán and Mr. Morawiecki, the Polish and Hungarian prime ministers, at their post-summit press conferences said that they were very satisfied with the outcome, which suggests that that particular part of the debates was concluded to their satisfaction.

And having this deal now hammered out, do you think it will be enough? Have they allocated enough grants and loans to get Europe out of the hole it's in?

If you were producing an economic response completely free of political constraints that make up the EU as we know it, then no, you'd probably have something somewhat larger than this. But that's probably not the baseline you should start from. 6 months ago, if we were to imagine how the EU might have responded collectively reactively to a crisis like this, it would have been almost unimaginable they would have come up with a response on this scale. And of course, you have to add to the stimulus package that has just been agreed at EU level the substantial national stimulus programs that you have in countries like Germany and many others, plus, of course, the monetary activism that we see from the ECB. If you compare this in the round with the European response to the financial crisis of 2008, which of course triggered a debt crisis inside the eurozone, it's of a completely different magnitude. They've acted much more they've acted much more decisively, and they've acted at a much larger scale. And I think that's probably the framework to assess the agreement that's just been struck.

But as you say, it's an entirely new way for the EU to wrangle the money.

Yes.

And this is why you're going to see every leader describe this outcome in different ways to their respective electorates. So for Mark Rutte, the Prime Minister of the Netherlands, this is a strictly one-off emergency measure that has been agreed after very tough debate because the EU is facing a one-off unprecedented crisis. For other leaders, perhaps President Emmanuel Macron of France, this is a milestone and it's historic precisely because it establishes the principle that when the EU is confronted by a challenge of this sort, it is able to act collectively, it is able to issue debt at scale, and once that principle is established once, it can very easily be put into again. My hunch is that those two perspectives, President Macron's, will turn out to be the more accurate, but we'll have to see how that plays out.

Which is to say that this sort of collective debt action would become more common to your mind?

Well, it has to be turned into legislation under the EU's normal procedures, and one potential sticking point there is that the European Parliament has to sign off on this.

Today we've taken a historic step we can be all proud of. But another important step remains ahead of us.

First and foremost, we now have to work with the European Parliament to secure agreement. But once you— this is what we know about the European Union— once you have established that something can be done, then that thing can be done again in the future. And I think Emmanuel Macron and other leaders know that very well, which is why they have all emerged from this summit saying this is a historic day for Europe. And on that, I actually think that they're right.

I believe this agreement will be seen as a pivotal moment in Europe's journey, but it will also launch us into the future.

Tom, thank you very much for joining us.

Great pleasure. Thanks.

For a lot more analysis like this, subscribe to The Economist. To find the best introductory offer wherever you are, just go to economist.com/intelligenceoffer. On June 11th, a band of jihadists rode their motorbikes to an army and police outpost on Ivory Coast's frontier with Burkina Faso. They killed 14 soldiers before riding off into the bush. Just 3 weeks earlier, Ivory Coast's army had declared the border to be under control. But jihadists are spilling out of failing states further north. West Africa's most populous countries are increasingly vulnerable to attack.

So jihadists have really taken root across the Sahel. That's the strip of land just south of the Sahara.

Kinley Salmon is The Economist's Africa correspondent.

They initially seized control of quite large chunks of Mali back in 2012. But since then, they've expanded a lot, and they've pushed from Mali across the border into Niger, and more recently, deep into Burkina Faso, which is just to the south of Mali.

And what's the scope of the threat? We've talked on the show before about the rise of jihadism in the Sahel. What are things like on the ground now?

Well, sadly, the war has been growing really rather rapidly. So about 10 times more people were killed in the last year than in 2014. If you look at Mali, Niger, and Burkina Faso just on their own, about 4,800 people lost their lives in conflict there last year. There's also been a big impact on displacement. So we've seen as many as 1.7 million people forced out of their homes. And particularly in recent months, the war is beginning to spread again. It's jumping across borders and starting to put at risk some of Africa's fastest growing economies, places like Benin, Ghana, and the Ivory Coast.

And who are the jihadists? What are they fighting for?

Well, there are quite a number of different groups involved, but there really are two big ones. One is the Islamic State in the Greater Sahara that's affiliated to the Islamic State that people would've heard of in the Middle East. And then there's another that goes by JNIM, which is an al-Qaeda-linked group. And these two groups are kind of the particularly big players, and they're trying to do a number of things in the Sahel. Firstly, they're trying to expand the territory of which they have influence over. And worryingly, they're doing that in a number of directions, particularly to the south towards Ivory Coast and other coastal states, but also west towards Senegal and to an extent as well to the east to try to connect up with other jihadist groups in Nigeria. They're also expanding in search of money to fund their own operations. They're smuggling They're involved in taxing trade, and they're also trying to control gold mines and export that for extra cash. And they really offer themselves to people in a way as an alternate state, certainly a state that serves up a very severe set of rules, Sharia law, but they've also in places offered medical aid. So it's a very violent set of groups, but trying to win over the population to some degree.

And the question when we've talked about this in the past has been the degree to which Western forces can lend a hand in this. Is that happening now?

Well, the West and France in particular is playing a role. France has sent over 5,000 troops to the region. There are a number of other European countries and American troops there as well. And in fact, as American troops draw down in Afghanistan, the Sahel will soon be the West's biggest combat zone. But unfortunately, progress has been pretty patchy. In June, they did kill Abdelmalek Drogdel, who's a senior al-Qaeda commander. But those successes don't seem to have made civilians much safer.

And you say that the conflict is spreading. Are the countries that now have this at their doorstep dealing with it any differently, any better than the countries that had already been threatened?

So security forces in places like Ivory Coast, Ghana, and Senegal are already preparing, and they perhaps got a little bit more strength than some of their neighbors to the north. You know, Ivory Coast has just created a special military zone in the north of its country to try to stop jihadists from gaining more of a foothold. But other countries like Togo and Benin may offer softer targets. And even in places like Ivory Coast, the army is made up of fighters that were on different sides in a recent civil war, and that could bring risks.

And what about the civilians in all these countries? How do they view this sort of advancing front?

Well, of course, many civilians are understandably alarmed, and millions of them have left their homes. But it is worth saying that the jihadists have also been adept at exploiting some ethnic fault lines, and that's led to tit-for-tat attacks between civilians from different ethnic groups and to some young men joining either ethnic militias or the jihadists themselves. And unfortunately, governments in the region and some Western forces have made matters worse as well by supporting some of these militias quite directly. And that's often escalated these tensions between different groups. Perhaps even worse still, governments have been accused frequently through their military forces of carrying out extrajudicial killings. So this year, one estimate from a data watchdog suggests that more civilians in the Sahel have been killed by government soldiers than by jihadists themselves. And the prospects for this improving don't look that good. We saw some cables from a diplomat in Burkina Faso that suggested the president has privately admitted that some of his citizens may feel safer living among terrorists than with their own country's security forces.

So where do you see this heading then with all of those people seemingly caught between a rock and a hard place?

Well, clearly there's no easy solution, but governments, analysts of all stripes say governments need to try to retain and regain some legitimacy. You know, that begins with just providing basic services. Having a presence in towns, having some form of administration, and holding themselves to account and stopping these kinds of atrocities we've seen. But the state also, you know, it needs to make sure that it's offering more than what jihadists are offering. And as mentioned earlier, in some cases they are providing a very crude form of justice and medical services. But also we've seen that as security has worsened, there have been growing calls for negotiations with some of the jihadists. And some tentative steps in that direction. The trouble is, of course, that these jihadists have really little incentive to try to make concessions when they're winning on the battlefield. And so for now, the outlook looks pretty bleak.

Kinley, thank you very much for your time.

Thank you.

As jihadists move toward Africa's coastal states, authorities are trying to stem the tide. And roundups of suspected insurgents in surrounding countries have magnified the problem of overcrowded prisons. In Burkina Faso, inmates can wait for more than a year before they're tried. But thanks to a local charity, some will leave prison with more than just their freedom. Like 31-year-old Roland Tapsoba, who's emerging as Burkina Faso's next big pop star.

Roland Tapsoba is a really quiet and shy man. He had done a little bit of hip-hop for fun in high school, and he was a former real estate agent convicted of fraud and then sentenced to 5 years in prison.

Sam Mednick writes for The Economist in Burkina Faso.

Life was really hard for him behind bars. All he wanted to do was get out. He was almost 3 years into his sentence when he entered a music competition that was run by African Culture, which is a local charity that tries to rehabilitate prisoners through the arts. And so he was taking weekly music classes, learning how to play the guitar, and those really became a lifeline for him. His favourite song was called "Wata Beogo," which means "I'm coming tomorrow" in Mossi, a local language, and it made him think about seeing his family again. Roland said, "When you're in jail, you might feel hungry or have needs, but those are physical needs. In your mind, the main priority is to get free, to go beyond the gates." Roland competed against 6 inmates and won an album deal and a music video, which he produced in jail.

Which I guess is a remarkable feat to pull off from jail.

To do something like this in a Burkina Faso jail is pretty incredible because at the best of times the jails are overcrowded, they're dirty, they can be dangerous. Roland would describe sleeping on a very thin mat in a, in a damp cell with many, many other men. Many people haven't been convicted of anything, they've just been thrown in there and are waiting up to even a year for a trial. And the overcrowding is getting worse because the government is rounding up young men suspected of supporting jihadists. And human rights groups say some prisoners are tortured. They don't get treatment for psychological problems or illnesses such as HIV or tuberculosis. So the charity is really trying to work to make these conditions slightly better for those in the system and also once they get out.

And you spoke to the charity about their successes?

Freeman Tapili is the founder of African Culture, and he spent a decade trying to support inmates through song and dance and to reduce the stigma they faced once they're released. The group, it's funded by the French government. It runs an annual music festival which takes place across the country in prisons, and they've actually started doing festivals right outside prisons in communities themselves to try and reduce the stigma even more. And so 2 years ago, it ran its first music competition, which produced Roland as well as another Burkinabé star. And this year it's going to do something a little bit different. Inmates will have the opportunity to write a play, which they're going to perform in different venues around the capital.

And so what's next for Roland and his unlikely musical career?

Since Roland's release last year from prison, his newfound musical fame has really helped him chart a new course of life. He goes by his stage name, Rolby, and he's in the process of creating new music, but right now because rules are a bit strict and because there's no large gatherings, he can't really have concerts. He's very thoughtful in terms of the lyrics in his songs. So for example, one of his winning songs reads, "After effort, there's comfort. After sweat, there is happiness. If life doesn't end, there is no despair. Take courage." And this was a song that he wrote speaking specifically to youth about holding fast to their convictions and not letting people tell them what to do.

Thanks very much for joining us, Sam.

Thank you for having me.

That's all for this episode of The Intelligence. If you like us, give us a rating on Apple Podcasts and see you back here tomorrow.