Economy & Politics

750 billion to revive a bloodless economy

With a recovery fund intended to support the member states damaged by the coronavirus, the president of the European Commission Ursula von der Leyen unveils on Wednesday an exceptional assistance plan, eagerly awaited.

With a recovery fund intended to support the member states damaged by the coronavirus, the president of the European Commission Ursula von der Leyen unveils on Wednesday an exceptional assistance plan, eagerly awaited.

(AFP) – The Commission has proposed a fund worth 750 billion euros, according to the European Commissioner for the Economy, the Italian Paolo Gentiloni. Of this sum, 500 billion would be redistributed in the form of grants – an amount recommended in the Franco-German project presented last week – and the rest in loans to member states, according to concordant European sources. If accepted, this proposal would be the biggest stimulus plan ever launched by the EU.

Italy and Spain, particularly affected by the pandemic, are the main beneficiaries of this recovery plan, said European sources. Out of a total of nearly 750 billion euros in grants and loans combined, Italy is expected to recover 172.754 billion euros, Spain 140.446 billion euros. The stimulus package is based on a revised draft long-term EU budget, backed by a new stimulus fund which would be funded by large-scale Commission borrowing on behalf of the EU unprecedented.

Paolo Gentiloni

The European Commission on Wednesday predicted a major economic slowdown this year among member states, devastated by the economic repercussions of the coronavirus pandemic, which require an unprecedented recovery plan.

“We potentially see a radical change in European macroeconomic policy (…) This creates an important precedent,” commented Wednesday Philippe Lambers, co-president of the Group of the Greens in the European Parliament, pending the presentation of Ms. von der Leyen. Last week, Germany surprised by announcing, with France, a radical change of doctrine: in a joint proposal, Paris and Berlin supported a plan of 500 billion euros, via a mechanism for pooling European debt, an option that Berlin has so far been hostile to.

But obtaining the unanimity of the member states, required from the budget, will be a difficult exercise. Already before the pandemic, the 27 had failed in February to agree on a budget of around 1,000 billion euros for the period 2021-2027. The economic storm did not close the ranks between countries of the North and countries of the South, the most affected by the health crisis. The different camps are grouped around a new fracture line: those, more rigorous (Netherlands, Austria, Denmark and Sweden), who want support only through loans, which will therefore have to be repaid, and those who do not want grants.

Politik, ITV Xavier Bettel für Europa Tag, Foto. Lex Kleren / Luxemburger Wort

The Old Continent commemorates without much fanfare due to the covid-19 crisis, the 70th anniversary of Robert Schuman’s declaration. The opportunity for an interview with Prime Minister Xavier Bettel who recalls the importance of European unity, especially in this period of pandemic.

Ursula von der Leyen’s project will be a mix between the two options, and in this “will not be a copy and paste” of the Franco-German proposal put forward last week by Angela Merkel and Emmanuel Macron, assured a European source. . The amount allocated to the stimulus fund and the conditions to benefit from it remain to be finalized and depends on the borrowing capacity of Brussels. Ursula von der Leyen wants to increase it by raising the theoretically available revenue in the budget – amounts that the EU can legally require from member states – to 2% of the EU’s Gross National Income (GNI), against 1.2 % currently, according to a Commission source.

On the eve of the presentation, one of the Commission vice-presidents Maros Sefcovic called for a rapid political agreement at the next European summit scheduled for June 18. In addition, the new budget will not come into force until 2021, so a solution will have to be found to have funding available in the fall to support economies threatened with recession. The next stimulus budget will also have to meet the political commitments of the Commission, which has placed digital technology and the energy transition at the heart of the growth of the Old Continent.

Without forgetting to develop the “strategic autonomy” of the EU, so that it is more resistant to crises and less dependent on outside, in particular China. The stimulus and the budget would be added to the 240 billion euros in loans from the European Stability Mechanism (ESM, euro area rescue funds), to the 200 billion euros from the guarantee fund for businesses and to the 100 billion of the SURE instrument created to support short-time working. The Commission has also validated 2.130 billion state aid since the start of the crisis, almost half of which was released by the German government to support its businesses.

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