Following a "marathon summit and tortuous negotiations", the EU has agreed a €750bn recovery package, alongside a €1trn+ seven-year budget, which industry figures have dubbed a "remarkable accomplishment", but one that has revealed "underlying tensions" in the bloc.
Paul O'Connor, head of multi asset at Janus Henderson Investors, said the "direct macroeconomic impact" of the coronavirus recovery package will be "fairly modest" compared to the damage caused by the pandemic.
"While consensus forecasts estimate that eurozone real GDP contracted 15% year-on-year in Q2, the recovery fund is expected to deliver a 6-7% boost that will take months to materialise and years to have its full effect."
Despite this, O'Connor noted that the "symbolism" of agreeing the recovery package is "very important" as it represents the eurozone's "first real attempt at mutualising debt" and its "biggest step yet towards fiscal integration".
He added that regardless of scepticism surrounding the package being a "one-off response to a one-off crisis", it has set an "important precedent", which will "undoubtedly" lead to pressure to make a similar move in a future economic crisis.
Wolfgang Bauer, manager of the M&G Absolute Return Bond fund, added that the "remarkable accomplishment" achieved in agreeing a recovery package between the EU leaders, including "joint borrowing at the European Commission level with the provision of outright grants", was "above and beyond" what most had anticipated in the recent past.
However, he added the "painfully long" negotiations, which were only 25 minutes short of the record held by the EU enlargement summit in Nice, "laid bare just how divided the EU is", highlighting the insistence of the 'frugal four' - Austria, the Netherlands, Sweden and Denmark - that their EU budget rebates be increased before accepting the proposal.
He added that, not only was this a "one-off incentive" that "cannot be repeated as often as one might like", but the successor to Merkel is likely to be "distinctly less supportive" and may pull Germany closer to the 'frugal four'.
An "alliance" between German Chancellor Angela Merkel and French President Emmanuel Macron meant there was "always likely to be a deal", according to Paul Brain, manager of the BNY Mellon Global Dynamic Bond fund, who added the original grants figure was around €500bn, but this was "watered down" to €390bn, but reiterated the deal still marked a "very significant positive contribution for Europe".
Quentin Fitzsimmons, portfolio manager at T. Rowe Price, added that the agreement "sends a strong signal and reduces the risk of a eurozone breakdown", but clarified it is important to remember "markets rarely react as planned".
The package is "likely" to be financed by EU debt, which Sébastien Galy, senior macro strategist at Nordea Asset Management, argued will be "of great benefit" to European banks as lead issuers on the debt, while also noting that a "significant portion" of it will be issued in green bonds.
David Zahn, head of European fixed income at Franklin Templeton, added that "30% of the coronavirus recovery fund and the €1trn seven-year budget are earmarked for fighting climate change", which he described as a "massive step towards the greening of the European economy and moving to a carbon neutral goal in 2050".