Sat | Jul 4, 2020

EU proposes coronavirus recovery fund

Published:Thursday | May 28, 2020 | 1:17 AM
European Commission President Ursula von der Leyen (left) addresses the European Parliament plenary in Brussels on Wednesday, May 27, 2020.
European Commission President Ursula von der Leyen (left) addresses the European Parliament plenary in Brussels on Wednesday, May 27, 2020.

The European Union proposed on Wednesday a ?750 billion (US$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.

The fund, to be mostly made up of grants and tied to the 27 member nations? common budget, 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 healthcare 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.?

Von der Leyen said that the fund ? which is dubbed Next Generation EU and must be endorsed by every country ? is ?providing an ambitious answer?, and she urged European nations to set aside their divisions about the budget and the way ahead.

?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.

To fund the move, the commission is proposing to borrow money from financial markets. The EU?s executive arm has a triple A credit rating, which it says will give it access to very favourable loan terms and moderate interest rates. 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 on January 1 and runs until December 31, 2027. It will then be channelled into a series of programs beneficial to the member states? economies.

Two thirds of the fund ? ?500 billion (US$543 billion) ? 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 in grants. France and Poland would each have access to around ?38 billion, 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 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, but the conditions are more onerous.

The proposal appears largely in line with a plan unveiled earlier this month, by he leaders of Germany and France ? historically, the two main drivers of EU integration. They agreed on a one-time ?500 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.