EU pleads for unity on virus rescue package
BRUSSELS yesterday urged divided EU governments to back its plans for a €750 billion (£673 billion) coronavirus recovery fund to save the bloc from a severe recession.
The European Commission wanted to borrow the money from international markets to channel it to the countries worst hit by the expected economic slump following lockdown.
The debt would be kept off overstretched national budgets and repaid in the form of higher national payments to the EU or with new taxes levied by the commission. Brussels hinted at a digital tax on tech giants or a plastics tax but these were sure to face resistance in Europe’s capitals.
Much of the money, buttressed by an increased trillion-euro EU budget over the next seven years, would go to Italy and Spain if the plan was unanimously supported by all 27 EU countries. The Netherlands, Austria, Denmark and Sweden were resisting taking on mutual debt, seen by many as an irreversible step toward greater integration. The “frugal four” believed the rescue package should only be made up of loans.
But leaders such as France’s Emmanuel Macron have warned a botched response could exacerbate wealth divisions and destroy the EU.
Ursula von der Leyen, president of the EC, said: “We either go it alone, leaving countries, regions and people behind, or we walk that road together.”
BRUSSELS will seek to borrow €750 billion (£672 billion) on international markets to finance a recovery from the coronavirus pandemic, the European Commission president said yesterday,
Ursula von der Leyen is also seeking a far larger European Union budget of €1.1trillion over the next seven years for a revival of the bloc’s shattered economy – a demand which will be the subject of tough negotiations between divided governments in coming months.
The plan, dubbed Next Generation EU, would spare the balance sheets of already indebted EU members and take advantage of the commission’s AAA credit rating to raise cash on the capital markets. The debt will be repaid over 30 years after 2027. However, it is likely to be seen by opponents of further integration as a power grab which could expose more prudent northern nations to higher bills.
The plans were unveiled after Christine Lagarde, the European Central Bank president, warned that the eurozone’s economy would shrink by 8pc to 12pc this year. The coming recession has been compared to the Great Depression by senior EU figures.
The allocations of grants and loans, which are yet to be confirmed, take into account the economic impact of the crisis and the relative GDP between member states.
Speaking to ment in Brussels, Mrs von der Leyen said: “Today we face our very own defining moment. What started with a virus so small your eyes couldn’t see it, has become an economic crisis so big you simply couldn’t miss it.
“A bankrupt company in one member state is a reliable supplier gone for business for another. A struggling economy in one part of Europe weakens another part of Europe. This is bigger than all of us, this is Europe’s moment.”
The plan requires unanimous support among the 27 EU states and is opposed by fiscally conservative members, who resist the idea of breaking the taboo of common EU debt on such a large scale. The proposal has been compared to Alexander Hamilton’s 18th century centralising of tax and debt-raising powers in the US, a key step along the road towards fullblown federal government.
Some €500billion will be provided in grants to the hardest-hit countries, with a further €250billion provided as loans. The commission plan hews close to a joint Franco-german statement that last week called for a €500billion recovery fund and was supported by Italy and Spain.
Emmanuel Macron, the French president, tweeted that it was “an essential day for Europe” and urged his fellow leaders to “adopt an ambitious agreement”.
But Austria, the Netherlands, Sweden and Denmark – known as the “frugal four” – are against the idea of grants and want any aid to be in the form of loans.
That stance has reopened wounds left from the financial crisis among some southern member states, which were forced to swallow tough terms in return for EU bailouts.
The frugal four are against the plan to temporarily raise the ceiling on national contributions to the EU budget, while poorer member states warned failure to show solidarity in the face of coronavirus could destroy the EU.
Mrs von der Leyen has also called for a series of new tax-raising powers for the commission, including a tax on plastics, a digital tax targeting US tech giants and levies on polluting industries, which would be paid into the budget.