4 nations counter EU’S plans with alternative fund

opposition to plans for the European Union (EU) to collectively finance its response to the coronavirus recession is taking shape after four members proposed a temporary fund for emergency loans as an alternative.

In a joint paper, the leaders of Austria, Denmark, Sweden and The Netherlands, often dubbed the “Frugal Four”, reiterated their opposition to debt and direct grants and to an increased EU budget, throwing cold water on the initiative set out by German Chancellor Angela Merkel and her French counterpart Emmanuel Macron on Monday.

“Our objective is to provide temporary, dedicated funding through the MFF and to offer favorable loans to those who have been most severely affected by the crisis,” the four countries wrote. “What we cannot agree to, however, are any instruments or measures leading to debt mutualisation nor significant increases in the EU budget.” The MFF, or Multiannual Financial Framework, refers to the EU’S seven-year budget.

Countries like Italy and Spain have been banking on the EU’S long anticipated recovery fund to help them rebound from the economic devastation caused by the pandemic. The European Commission, the EU’S executive arm tasked with formulating a blueprint, will present its plans on May 27.

Even though EU leaders have agreed on the need for such a fund to assist with the recovery, they have different views whether it should disburse loans or grants, what its total size should be and what the money should be spent on. In an effort to speed up the discussions, Merkel and Macron threw their weight behind a plan to allow the commission to issue 500 billion euros ($545 billion) of bonds, with the proceeds going to help member states affected most by virus.

Recipients of the funds won’t need to pay the EU back and the securities would be financed collectively. That means richer countries would bankroll poorer ones. The proposal will need unanimous approval by all 27 members of the EU and the bloc’s parliament.