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This week the European Recovery Fund agreement was defined



The beginning of the week started with long days of negotiations but without reaching any agreement. The 27 heads of state and government meeting in Brussels for the extraordinary European Council could not find an agreeable solution on the distribution of aid between grants and loans. The compromise proposals suggested by President Michel seemed unacceptable by the so-called "frugal" countries, namely the Netherlands, Austria, Denmark, Sweden, which also challenged the rules of access to funds. According to their initial requests, a right of veto should have been provided for national plans to be submitted for obtaining the funds. After further long negotiations, an agreement was made on the basis of 750 billion Euros, of which 390 billion will be grants and 360 billion in loans on favorable terms. Europe is moving towards greater fiscal integration and strongly signals the irreversibility of the euro.

On the U.S. front, the White House, with the backing of the Republicans, lays the groundwork for the new plan of fiscal stimulus of 1 trillion dollars. In turn, Democrats propose their own expansionary tax policy program of about 3.5 trillion dollars. The labor market is increasing in new claims for unemployment benefits of 1.41 million; the previous figure was 1.3 million and expectations were also at 1.3 million. Total subsidies contracted to 16.1 million, from 17.3 million: economists expected 17.1 million.

The increasingly evident advance in commodity prices with gold and silver firmly embedded in a continuous growth trend should be noted. Among the factors that may have influenced investment decisions on these assets are President Trump's latest statements on the Covid-19, which calls on citizens to be more cautious, praising governors who have re-introduced some contagion containment measures and expecting further expansion of the virus in the short term.


The Korean economy has declined sharply, which, according to Bank of Korea surveys, has not reported such a large negative change since the first quarter of 1998: the second quarter shows a -2.9% of annual GDP, a sharp deterioration from the positive figure of 1.4% in 2019 and lower than estimates of -2.0%.

The whole scenario is characterized by the flare-up of trade tensions between the United States and China with the fears of the Covid-19 pandemic in the background. Washington has decided to close the Chinese consulate in Houston, Texas on the grounds that it is carrying out illegal activities such as industrial espionage and the theft of scientific research. The Chinese government responded by stating that no illegal activity took place and, in turn, ordered the closure of the American consulate in Chengdu, the capital of Sichuan, in the southwest of the country. Beijing's widely predictable counter-move deprives the United States of a strategic diplomatic headquarters in that part of the country that includes two important regions such as Tibet and Xinjiang. There are almost daily attacks between the world's two largest economies and these tensions are reflected in a climate of uncertainty that affects financial markets.

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