Brussels ‘thinks big’ – now it must get the backing of each state over grants and loans

Is this EU coronavirus recovery plan big stuff?

Yes. In fact it is huge – and it has to be. The virus has killed 173,000 people across the 27 EU member states. It has put the economy of 440 million people into the deep freeze and left citizens facing the biggest recession in the EU’s 63-year existence.

European Central Bank president Christine Lagarde has said the threatened recession will be twice as bad as what followed the 2008 banking and economic collapse.

So what is planned?

Most importantly, it breaks a long-standing taboo that the EU itself does not borrow big sums and solvent states do not pick up the tab for those mired in debt. It is about trillions, billions and eventually millions.

The overall package is €750bn split into two-thirds non-repayable grants and one-third in low-interest loans. It is in addition to the EU’s €1.1tn budget plan for the years 2021-2027.

EU Commission President Ursula von der Leyen said it was the biggest aid programme in history.

How is this funded?

The EU will use its AAA credit rating to borrow against its mammoth budget. Capital repayments start in 2028 and continue until 2058 and are to be funded from new arrangements.

Who gets this coronavirus recovery money?

Those worst hit get most, according to EU Commission plans for dividing the cake. Italy with €82bn in grants and Spain with €77bn lead the pack. France and Poland expect to get €28bn in grants and that’s the same amount as Germany.

All these countries also qualify for low-interest loans. All the EU countries have also benefited from international money market support from the European Central Bank which has kept money market borrowing rates down.

The EU has suspended debt and deficit limits on member states and also eased rules policing state aid to prevent big companies going under.

What does Ireland get and what will it go on?

Almost €2bn in grants – not bad when you reflect on population difference and the impact on Italy, Spain and France particularly. There will be an extra €254m for rural development, especially promoting biodiversity and climate change; €215m for regional and social projects; €132m for “just transition” for ending turf cutting and power generation.

A big chunk of the money, some €1.2bn to be frontloaded in the first two years 2021-2022, will aid “recovery and resilience”, it will help adapt to climate change policies, environmental and green agendas and help countries develop independence in medical goods and facilities.

Is there a drawback for Ireland?

There could be. The documentation includes proposals for various new EU revenue-raising including

Paschal Donohoe’s eye will especially be on new taxes on big tech companies such as Facebook and Google

new taxes. Paschal Donohoe’s eye will especially be on new taxes on big tech companies such as Facebook and Google.

Brussels officials say that could net €1.3bn per year if it goes ahead.

It intensifies Ireland’s ongoing tax battle – but we are not alone here.

Are those big EU rows ended by this plan?

No. Think of this as the ring road getting you to the next traffic jam faster.

It was welcomed by Italy, Spain, France and Germany.

The northern EU countries have shifted their opposition to try to block so much grant aid.

Other countries will be arguing it must not amount to a diversion of the bigger €1.1tn budget pot.

More rows are already on but the EU hopes there will be a deal by the end of July.

There’s a plan to get back to face-to-face leaders’ summits from late June – coronavirus permitting.