ALEX BRUMMER: EU’s bail-out will not head off large scale unemployment

The longest summit in the European Union’s history finally has delivered a result. The £680billion Covid-19 rescue package breaks new ground. For the first time the EU itself will borrow in its own name.

European enthusiasts have hailed this as a ‘Hamilton’ moment: recognition that revolutionary America was more than a collection of states and required central monetary and fiscal powers.

The hard-fought Brussels deal also sets a precedent for the richer countries of northern Europe providing direct subventions to the south and east of Europe with the bulk of shared cash to go to Italy and Spain.

The four-day summit cannot be called an unalloyed triumph. It exposed deep-seated divisions between the ‘frugal four’ of Austria, Denmark, the Netherlands and Sweden and the less well-off nations, with Germany and France holding the ring.

By global standards, the EU package – shared among 27 countries – is notable for its modesty. 

As was the case after the financial crisis and the difficulties of 2009-10, it will not be enough to head off large-scale unemployment in the south and east.

Measured against the US’s $2 trillion-plus bailout, and Japan’s similar package, it is a mere bagatelle. 

First proposed in May, the time it has taken to bring the rescue package to fruition will mean further scarring.

The funds will not be instantly available. To qualify for the £279billion of core grants countries will have to prepare national recovery plans to be approved by fellow EU members, and cash will not be distributed until 2021-23, by which time weaker economies could be flat on their backs.

A chunk of the rest will be used to make up holes punched by the UK and other countries in the EU’s existing budgets.

It is in Britain’s interest that the EU – a huge market for UK goods and services – pulls out of its nosedive quickly. 

Markets might be impressed by a show of unity, but there should be no pretence that the deal ushers in a new age of EU prosperity.

Mixed fortunes

Lockdown and home working should have produced more big winners. Royal Mail has had an enormous opportunity with parcel delivery and shipped 117m more parcels in the three months to June, an increase of 38 per cent. 

TalkTalk should be a winner from the digital revolution. And Bloomsbury should be a beneficiary of more reading. All have decent stories to tell.

Royal Mail and the posties rose to the challenge of the online shopping boom. But unrelenting labour problems mean that surging parcel deliveries don’t feed through to the bottom line. 

Practices in the sorting offices are Luddite with each package passing through three to four hands before it gets to the doorstep.

Imagine how different it would be if the Royal Mail could use the AI and robotics which has sent Ocado shares soaring.

It seems bonkers that no-frills telecoms operator TalkTalk reports a Covid-19 reduction in revenues, citing a lack of live sports. That has not prevented Netflix and other online entertainment groups putting on millions of extra subscribers.

TalkTalk has seen the opportunity and launched Business Grade Homeworker packages, which it says will benefit from new work patterns.

When one considers how Zoom, Microsoft Teams and Slack have brought digital experiences to almost every home in the UK during lockdown, the lack of speed and determination to upgrade connections in the same period is inexplicable.

Contrast this with Bloomsbury which caught the lockdown zeitgeist. Children’s book sales were up 27 per cent in the four months to the end of June, thanks (as always) to Harry Potter. 

Adult titles – including Sarah J Maas’s Crescent City: House Of Earth And Blood – are up 29 per cent. An impressive adaptation to a new normal.

Turkish threat

It is never good when HMRC says it is investigating your company, especially when a claim of bribery is invoked.

Just a week after GVC chief executive Kenny Alexander revealed he was stepping down, the gambling group finds its ex-Turkish operations under scrutiny. 

GVC’s historic domicile in the Isle of Man and online operations in Gibraltar have long suggested that the tax affairs of the Ladbrokes Coral owner might need more scrutiny.

The big risk is that the Turkey probe could attract the attention of the US authorities, derailing the alliance with MGM Resorts.

Tricky.