EU proposes 750 billion-euro coronavirus recovery fund
BRUSSELS (AP) — The European Union proposed a 750 billion-euro ($825 billion) recovery fund to help countries weather a painful recession triggered by the coronavirus and sought Wednesday to bridge divisions over the conditions that should be attached for access to the money.
The fund, to be mostly made up of grants and tied to the common budget of EU’s 27 member nations, comes as the world’s biggest trading bloc enters its deepest-ever recession, weighed down by the impact of the virus pandemic. Virtually every country has broken the EU’s deficit limit while spending to keep health care systems, businesses and jobs alive.
“Our unique model built over 70 years is being challenged like never before in our history,” European Commission President Ursula von der Leyen told EU lawmakers as she unveiled the plan. “This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing.”
As Europe’s residents slowly return to workplaces and classrooms, countries hit hardest by the pandemic such as Italy and Spain remain in desperate need of funds and want to avoid long-term wrangling. Barely off the press, the EU’s recovery proposal received mixed reviews, with Dutch officials notably cool on it.
Von der Leyen said the fund, which is dubbed Next Generation EU and must be endorsed by every country, is “providing an ambitious answer.” She urged European nations to set aside their divisions.
“We either all go alone, leaving countries, regions and people behind, and accepting a Union of haves and have nots. Or we take that road together, we take that leap forward. For me, the choice is simple. I want us to take a new bold step together,” von der Leyen said.
The European aid, which would come on top of another half-trillion package and trillions of aid from individual EU countries, is part of a slew of programs that countries around the world are deploying to blunt the recession. The U.S. government has put up over $2 trillion in support for companies and workers. Japan on Wednesday approved a supplementary budget that brings its fiscal support to over 230 trillion yen ($2.1 trillion).
To fund its move, the EU’s executive arm proposed borrowing money on financial markets. The European Commission has a triple A credit rating, which would give it favorable loan terms. Repayments would not begin before 2028, with the full amount due after 30 years.
The money raised will go into the EU’s next long-term budget, which starts Jan. 1 and runs until Dec. 31, 2027. It will then be channeled into a series of programs beneficial to the member states’ economies.
Two-thirds of the fund - a half-trillion euros - would take the form of grants, while the rest would be made up of more conditions-based loans for which countries could apply. Italy and Spain would each be eligible for around 80 billion euros in grants. France and Poland would each have access to 38 billion euros, while Germany could get 28 billion euros.
The grants will not just be handed over. Applying countries would have to outline their aims for the money and what reforms they intend to undertake to ensure their economies are more resilient in the future. The applications would have to be endorsed by the EU partners.
Italy, Spain and Poland would also be eligible for tens of billions of euros in loans, and the conditions are even more onerous.
The proposal put forward Wednesday appears largely in line with a plan unveiled earlier this month by Germany and France, historically the main powers in the EU. They agreed on a one-time 500 billion-euro fund, which was seen as a major political breakthrough due to Berlin’s acceptance of shared debt between member countries.
But Austria, Denmark, the Netherlands and Sweden — a group of countries dubbed the “Frugal Four” — are reluctant to give money away without strings attached, and their opposition to grants could hold up the project.
Dutch Prime Minister Mark Rutte indicated that positions among the 27 nations were far apart on a massive issue that requires unanimity. He said that finding a compromise in time for an EU leaders summit next month was far too ambitious.
“I think this will take a lot more time,” Rutte, who pointedly talked about loans but not grants, told reporters.
Conservative Dutch EU lawmaker Esther de Lange insisted that the Frugal Four’s concerns should be taken into account.
“We’re all in the same boat and ... we need to work together. But if you propose making this a matter of 23 against four, we won’t succeed. You will push those four countries into the arms of the extreme right,” de Lange said. “We will have to do it together.”
Other reviews were more favorable. Greece cheered the commission’s plan as a “bold proposal.” Spain said it “evaluates positively” the proposal. Germany also seemed agreeable, as much of the contents matched Berlin’s own thinking.
Ultimately though, the EU simply does not have much time. A row over the spending package for the budget period that begins at the start of next year has already dragged on for two years. For the budget and recovery package to come into force, an agreement must be found before September.
German Chancellor Angela said it’s unlikely to be agreed on at the next EU leaders’ summit in June. But she warned that “the goal must be that we find enough time in the fall for national parliaments and for the European Parliament to debate the matter in such a way that everything can come into force on Jan. 1, 2021.”
It’s not the only EU effort to tackle the economic fallout of the pandemic. The fund comes on top of a 540 billion-euro package agreed among EU finance ministers, which includes loans from the eurozone bailout fund that would have to be repaid.
The European Central Bank also recently announced 750 billion euros in new bond purchases to help the economy.
Samuel Petrequin and Raf Casert in Brussels, David Keyton in Stockholm, Frank Jordans and David Rising in Berlin, Elena Becatoros in Athens and Joseph Wilson in Barcelona, Spain contributed to this report.