The European Commission has announced plans to borrow 750 billion euros in order to help EU member states combat the impact of the coronavirus crisis.
While the Commission has yet to reveal exactly how much each member state will get, the AFP news agency has reported that Poland would be the fourth largest beneficiary of grants under the proposed coronavirus recovery fund, called Next Generation EU, receiving up to 37.7 billion euros. Only Italy, Spain and France would receive more.
“Next Generation EU is a common investment in our future which will demonstrate the tangible benefits of being a member state,” said European Commission President Ursula von der Leyen when presenting the proposal to the European Parliament.
“We face a binary choice: we either go it alone, leaving some countries and regions behind, or we walk the road together,” she added. “Given the scale and the nature of this challenge, I believe that the response can only be European. Let’s take a bold step. Long live Europe.”
Next Generation EU will raise money by temporarily lifting its own resources ceiling to two per cent of EU gross national income (GNI), allowing the Commission to use its strong credit rating to borrow the 750 billion euros on the financial markets. This money will be repaid over a long period of time through future EU budgets – not before 2028 and not after 2058. Mrs von der Leyen also mentioned, however, the possibility of introducing new taxes to cover interest and repayment costs, such as a levy on carbon-intensive industrial products shipped from outside the bloc.
The post Covid-19 fiscal recovery fund includes a total of 500 billion euros which will be given to member states through grants, and an additional 250 billion euros via favourable loans. It comes on top of the EU’s current liquidity package of 540 billion euros.
In order to access the funds, the Commission has said that member states will have to present reform and investment plans aligned with the EU’s priorities and country-specific recommendations issued by the EU executive, and has stressed that recovery must unequivocally be based on fundamental rights and full respect for the rule of law.
The European Commission issued country-specific recommendations (CSRs) last week, providing economic policy guidance to all EU member states in the context of the coronavirus pandemic, focused on the most urgent challenges brought about by the pandemic and on relaunching sustainable growth.
The recommendations are structured around two objectives: in the short-term, mitigating the coronavirus pandemic’s severe negative socio-economic consequences; and in the short to medium-term, achieving sustainable and inclusive growth which facilitates the green transition and the digital transformation. The CSR’s for emerging Europe’s 11 EU member countries can be viewed here: Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia.
“The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalisation will boost jobs and growth, the resilience of our societies and the health of our environment. This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer,” said Mrs von der Leyen.
The response package was broadly welcomed by the leaders of Europe’s political groupings within the European Parliament.
“This is a European response to a European crisis,” said Dacian Ciolos, a former Romanian prime minister and leader of the Renew Europe group in the parliament. “We must stand united, and fight as one.”
“Some governments think that they can do it alone. They should think again,” said Ska Keller, leader of the European Greens.
Not everyone was impressed, however.
“This is nonsense, you are spending money as though there is no tomorrow, all in the name of solidarity,” said Jörg Meuthen of the far-right Identity and Democracy group.
The plan must now be signed off by the 27 member states, possibly as soon as the next meeting of the European Council in July. The Commission believes that reaching a rapid political agreement on Next Generation EU is necessary to give new dynamism to the recovery and equip the EU with a powerful tool to get the economy back on its feet and build for the future.
This may not be easy. The EU’s so-called “frugal four” – Austria, Denmark, the Netherlands and Sweden — have stressed that the recovery fund should be based on loans, not grants, and the latest proposal may not go far enough to meet their demands.
Dutch Prime Minister Mark Rutte summed up the feelings of the frugal four on Tuesday. A fund was necessary to stimulate recovery, he said, but “we believe this should consist of loans, without any mutualisation of debts.” Germany and France, however, have backed the Commission’s plans.
The Commission also today proposed a budget of 1.1 trillion euros for its multi-annual financial framework (MFF), covering the seven-year period from 2021-27.
The proposal is below the level originally suggested by the Commission in May 2018 for the 2021-27 period, but higher than a compromise plan put forward in February by European Council President Charles Michel.
In 2018, the Commission proposed a budget of 1.135 trillion euros, or 1.11 per cent of the bloc’s GNI. Michel proposed 1.095 trillion euros, which at the time was estimated to equal 1.074 per cent of GNI.
Commissioner Johannes Hahn, in charge of the EU budget, said: “Our common budget is at the heart of Europe’s recovery plan. The additional firepower of Next Generation EU and the reinforced multi-annual financial framework will give us the power of solidarity to support member states and the economy. Together, Europe will arise more competitive, resilient and sovereign.”
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