European Commissioner for Economy Paolo Gentiloni talks to journalists during a news conference at the EU headquarters in Brussels, Wednesday, May 20, 2020. (John Thys/Pool Photo via AP)
The European Union proposed Wednesday a 750 billion-euro ($825 billion) recovery fund to help countries weather a painful recession triggered by the coronavirus and bridge divisions over the conditions that should be attached for access to the money.
Unveiling the package to EU lawmakers, European Commission President Ursula von der Leyen said: “This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing.” She said that the fund, dubbed Next Generation EU, is “providing an ambitious answer.” Two thirds of the money would take the form of grants, while the rest would be made up of more conditions-based loans that countries could apply for.
Italy and Spain would each be eligible for around 80 billion euros in grants. France and Poland would have access to around 38 billion euros, while Germany could get 28 billion.
The grants will not just be handed over. Countries would have to apply, setting out their aims for the money and what reforms they plan to undertake to ensure their economies are more resilient in the future. The applications must be endorsed by the EU partners. Italy, Spain and Poland would also be eligible for tens of billions of euros in loans, but the conditions are more onerous.
The 27-nation EU remains deeply divided over what conditions should be attached to the funds, and the commission proposal is likely to set off weeks of wrangling.
The move comes as the world’s biggest trading bloc enters its deepest-ever recession, weighed down by the impact of the coronavirus. Virtually every country has broken the EU’s deficit limit as they’ve spent to keep health care systems, businesses and jobs alive. While citizens across Europe are slowly returning to work and students move gradually offline and head back to classrooms, hardest-hit countries like Italy and Spain remain in desperate needs of funds and want to avoid any long-term wrangling.
Earlier this month, the leaders of Germany and France — historically, the two main drivers of EU integration — agreed on a one-time 500 billion-euro ($543 billion) fund, a proposal that would add further cash to an arsenal of financial measures the bloc is deploying to cope with the economic fallout.
That plan envisaged the EU borrowing money in financial markets – an unprecedented move by the commission – to help sectors and countries that are particularly affected by the pandemic. The EU’s blueprint resembles the Franco-German plan in many ways while attaching the fund to the EU’s next long-term budget.
Austria, Denmark, the Netherlands and Sweden — a group of countries dubbed the “Frugal Four” for their budgetary rectitude — are reluctant to see money given away without any strings attached, and their opposition to grants could hold up the project. “If it will be grants, who are going to pay the grants? Loans, I think is a more interesting way forward to discuss, but we also have to discuss under what conditions shall we give these loans,” Swedish Finance Minister Magdalena Andersson said Tuesday.
The commission’s plan is likely to spark heated debate and the EU does not have time for the wrangling to drag on. The new budget period begins on Jan 1, and countries across the bloc are desperate for funds now. All 27 member countries must agree for the recovery fund to take effect.
Source: Associated Press