When we read through the official document for yesterday's briefing, we were perplexed that the numbers did not add up - at least not in an obvious way. Further study of the proposal has revealed to us the reason why. The European Commission's claim that €500bn of the €750bn package comes in the form of grants is misleading. A more correct assessment is €400bn, which includes the €310bn grant element in the recovery plan and various bits and bobs, including an increase in structural funds. But it also includes components which the EU classifies as grants but whose ultimate incarnation is a loan. This is the Commission's old Juncker-fund reflex. It starts off by taking some real money and then leveraging it into a large loan. Whether this works or not is beside the point. Economically, this is not a fiscal impulse because it relates to claims that must be ultimately repaid. 

FAZ made a similar observation about the programme this morning. The EU will in the end only have to refinance €400bn-€450bn. If you look it at from the financing side, as opposed to how the EU accounts for the money, you get a truer picture of the economic nature of the package. This is also why the sum-total of the national allocations we presented in a table yesterday only adds up to a little over €400bn. The gap is loans masked as grants.

Our estimate yesterday of an annual EU-wide economic impact of 0.56% of EU GDP for four years related only to the recovery fund. If you want to add the impact of the other real measures - some €100bn in structural funds, rural subsidies and climate change transition - you can add another 0.3pp to it. But this applies only for the two years during which these programmes will run. Also beware that several commentators arrive at higher percentage numbers than we do because they divide the multi-annual programmes by a single year's GDP. In reality the amounts will be lower. These are ceilings. From these numbers you have to deduct three important categories of uncertain size.

The first is the extent of the member states' own share in the future refinancing of those loans. The EU funds more than half of its activities through direct contributions of member states. Italy's share in EU GNI is approximately 15% post-Brexit. There will be a direct Italian share in the repayment of the €80bn that Italy stands to gain initially.

Second, the money will be tied to conditions. What will happen if these conditions are not fulfilled? In other words, will the EU really spend all of the money, or is this just a ceiling?

Third, will the package survive the onslaught of the frugal four? The EU will need the consent of each of them to move ahead. They each will extract a price. On a per-capita basis, the frugal four are among the five largest net contributors to the EU budget. Leif Pagrotzky, a former Swedish economics minister, made the argument in Dagens Nyheter that Sweden should not veto the recovery fund, but argue that it is a eurozone-only instrument and Sweden should not take part in it. We agree with that argument. There is a lot of muddled thinking in Brussels about the nature of the monetary union, which is one of the reasons why the eurozone is stuck in a perma-crisis. The recovery fund is an economic necessity that arises as a direct result of countries having locked themselves into a permanent monetary union. It is not another regional aid programme.

The Dutch and the Austrians will have different objectives. We don't think they will want to veto the package, but the net economic gain for the EU as a whole is likely to be reduced through rebates for these countries. For example, if non-eurozone countries were allowed to opt out from the recovery fund, the refinancing burden on the remaining countries would increase, which in turn would reduce the extent of the fiscal transfer that is built into the package.