European Commission President Ursula von der Leyen will today propose a roughly one-trillion-euro post-coronavirus recovery fund for Europe, but will have to win over sceptical member states.
The global coronavirus outbreak has thrust the European Union into its deepest ever recession, and President Von der Leyen’s proposal will set out to help the worst affected countries.
The French newsagency AFP reports the virus has killed at least 172,000 people in Europe and put its economy in a deep freeze, with businesses only slowly reopening and tight controls on borders that were once wide open for travel and trade.
Italy and Spain were Europe’s first victims of the outbreak and, still burdened with heavy debts, lack the firepower of Germany and others to rebuild their shattered economies.
Reuters Newsagency reports as well eight European countries have urged the EU to include natural gas in future funding, as the bloc’s executive prepares to unveil its plan for a green economic recovery from the coronavirus pandemic.
Bulgaria, the Czech Republic, Greece, Hungary, Lithuania, Poland, Romania and Slovakia have asked Brussels not to exclude natural gas projects from future funding.
“It is of crucial importance to maintain EU support and financial assistance for the development of gas infrastructure,” they said in a discussion paper seen by Reuters.
Brussels is under pressure to curb fossil fuel funding as it strives to decarbonise its economy by 2050.
The European Commission, the EU’s executive arm, has won the crucial backing of Germany and France to raise €500 billion on financial markets to begin to fix the problem.
German Chancellor Angela Merkel dropped a bombshell last week by approving an idea that partly reverses Berlin’s staunch opposition to joint borrowing by EU members.
Chancellor Merkel, who is in the final years of a long stint as German chancellor, also backs the EU helping virus-struck countries with grants rather than loans, another policy U-turn by Berlin.
AFP reports the French-German plan faces a counter-proposal from the so-called Frugal Four: northern EU member states who have traditionally opposed giving more cash to Brussels or transferring it to the indebted south.
They firmly oppose paying out aid in grants, preferring loans that come with stern conditions and outside oversight, and reduce risk to their own taxpayers.
They also accuse southern Europeans of living beyond their means and piling on debt instead of choosing fiscal reform.
The grants versus loans debate is no small matter, with Italy, Greece and Spain already crippled by mountains of debt, despite embarking on painful reforms since the 2008 financial crisis.
European Central Bank (ECB) Vice-President Luis de Guindos has warned that more debts incurred by countries already under pressure could spook the markets and endanger the euro single currency.
AFP reports the ECB strongly backs joint borrowing by the EU to check that threat.
Janis Emmanouilidis, of the Brussels-based think tank European Policy Centre, said the French-German proposal, “makes it difficult for others to resist compromise.”
Still, given the frugals’ approach, “you just know how far away we’re still from an EU-27 compromise, strong infighting is ahead,” he said.
A top EU official said that President Von der Leyen’s compromise would propose about one trillion euros through a mix of grants and loans.
President Von der Leyen will first deliver the plan to the European Parliament before hosting a news conference and then devote the next weeks and months to tough negotiations with EU nations and MEPs.
Diplomats predict talks could drag on until at least July, while experts do not expect an agreement before September, when Germany has taken over the rotating EU presidency.
Financing the plan could take even longer as it would require ratification by national parliaments across all EU member states, typically a risky process.
President Von der Leyen’s commission has already delivered more modest recovery aid, including insurance for strained partial employment schemes as well as suspending rules on running up national deficits
The 19 countries that use the euro single currency have already made available €540 billion in loan guarantees for emergency health spending.
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