Newsletter: The surge in commodity prices and European recovery prospects

Newsletter: The surge in commodity prices and European recovery prospects

Thursday, 8 april 2021

Funcas Europe

Good morning Future is blue readers,

Since the start of the year, the world economy is witnessing a significant increase in a wide range of commodity prices as well as lags in the delivery key inputs, such as semi-conductors. We are once again hearing comments about a so-called commodities supercycle. To know more about what's at stake we have recorded a podcast with Lourdes Casanova, Gail and Rob Cañizares Director, Emerging Markets Institute, Cornell University, hosted by Future is blue Editorial coordinator Carlos Carnicero Urabayen. More on this below.

We are also covering state aid, a policy tool that is being used increasingly by EU governments to alleviate the financial situation of those businesses hit by the Covid crisis. Faced with the prospect of cascading bankruptcies and a multiplication of defaults, as well as the risk that this entails for financial institutions and for the financing of the economy as a whole, governments have gradually chosen to implement direct aid and refinancing operations – rather than cheap loans.

See at the end what we are reading these days.

Commodities surging prices and the challenges for Europe’s recovery

A supercycle is an extended period during which demand drives commodities’ prices well above their long-run trend. Are current patterns something transitory or are we indeed entering a commodities supercycle? In our podcast we analyse the impact of these trends, what it means for Europe´s fragile recovery and, more broadly, what are the implications for globalisation as we enter into a new post Coronavirus world.

Access here the podcast with Lourdes Casanova, Raymond Torres and Carlos Carnicero Urabayen.

State aid to enterprises in France, Germany, Italy and Spain

One of the most worrying consequences of the crisis generated by the pandemic is the deterioration of the financial situation of European companies. The restrictions operated during the first wave of contagion caused an abrupt economic shock, to which government policies responded not only through job-retention support, but also by providing loans under advantageous conditions and guaranteed by the state. As a consequence, although part of the burden of crisis responses was assumed by the government, corporate debt soared, especially in the sectors most affected by mobility restrictions. Governments have therefore shifted to a new approach: direct state aid.

In Funcas Europe we’ve done a comparative analysis of direct state aid policies in France, Germany, Italy and Spain. It’s interesting to see differences and similarities when it comes to eligibility criteria, the amount of funds available and budgetary costs and implementation. 

You can access the full article here

What we are reading

Why Europe should spend big like Biden? 
The scale of Biden’s spending plans means the US economy will recover much faster than Europe’s. Yet in many ways it is the European economy that is in greater need of stimulus, claim Christian Odendahl and John Springford from The Centre for European Reform.

For a better, faster recovery: 1,000 euros checks for Europeans
The EU must send a strong signal to national governments that they should continue with support for their economies and make sure EU money reaches its intended destination in a matter of months, not years, argues Pedro Marques, Member of the European Parliament.

The unequal inequality impact of the Covid-19 pandemic
Less educated workers have suffered most from job losses in the Covid-19 pandemic, and it is quite likely there was a significant increase in European Union income inequality in 2020, writes Bruegel’s Zsolt Darvas.

Brexit and the City of London: What has changed?
The EU and the UK have agreed a new financial services pact that will allow cooperation on regulation but does little to improve the city of London’s access to the bloc.

Have a nice week!

Raymond Torres, Funcas Europe Director


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