The European Union’s executive unveiled a 750 billion euro plan on Wednesday to prop up economies hammered by the coronavirus crisis, hoping to end months of squabbling over how to fund a recovery.
The European Commission would borrow the funds from the market and then disburse two-thirds in grants and the rest in loans to cushion the unprecedented slump expected this year due to the coronavirus lockdowns.
Much of the money will go to Italy and Spain, the EU nations worst affected by the pandemic.
EU leaders agree that, if they fail to rescue economies now in free fall, they risk something worse than their divisive debt crisis of a decade ago, which threatened to pull the eurozone apart.
Fiscally conservative northern countries have resisted pressure from a “Club Med” group to take on mutual debt to protect the EU’s single market of 450 million people from being splintered by divergent economic growth and wealth levels.
“We either all go it alone, leaving countries, regions and people behind and accepting a union of haves and have-nots, or we walk that road together...,” said European Commission President Ursula von der Leyen.
The Euro rose as she laid out in the European Parliament details of the Commission's plan, entitled "Europe's Moment: Repair and Prepare for the Next Generation".
The grants, although controversial, are needed because Italy, Spain, Greece, France and Portugal already have high debt and rely heavily on tourism, which was halted by the pandemic.
The recovery fund package comes in addition to the EU’s long-term budget for 2021-27, which the Commission proposed should be set at 1.100 trillion euros ($1.21 trillion).
“In total, this European Recovery Plan will put 1.85 trillion euros to help kick-start our economy and ensure Europe bounces forward,” the Commission said in its plan.
The plan has to be approved by all 27 member states and the European Parliament.
The borrowing will ultimately have to be repaid, meaning higher national contributions to the EU budget in the future or new taxes assigned to the bloc.
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