EU budget at the core of EUCO: loans, grants or both?

Ahead of a crucial EU Council meeting today (23 April), a high-ranking French source told EURACTIV France: “We are not at all out of the health crisis.”

“We need an amount representing 10% of the EU’s GDP, which is the amount that Germany has put on the table to support its economy. For the EU, this would amount to about €1.5 trillion,” the source added.  

An EU diplomat told that according to the latest talks, the EU will borrow money from the markets and pour it into the EU budget. The big question is how this money will  be distributed to member states – in the form of long-term loans, grants or a combination of the two.

In Lisbon, Portuguese PM António Costa said on Wednesday (22 April) that Portugal needs to know whether the EU’s post-coronavirus economic recovery plan would offer “a slingshot or a bazooka”.

Lusa reported that Costa stressed that some funding should be from the issuance of joint European debt, and that distribution among member states is crucial. “Our response is that this transfer should be secured […] through the transfer of grants and not loans, although we cannot exclude, and let us not exclude, that for some programmes … loans may be the appropriate form,” he added.

The EU diplomat also added that it’s possible that the so-called “budget corrections” will be phased as the EU’s own resources system is modernised, an issue raised yesterday by the socialist group in the European Parliament.

The French source was not against the idea of the EU increasing its own resources, but initially rejected the idea “because it is urgent, we can agree at 27 to issue debt which will be common, but when it comes to deciding on a carbon tax or the tax on financial transactions, things become more complicated.”

Europe’s south wants flexibility in the EU budget when it comes to money transfers among different files, as well as a single market that not only works for goods but also for free movement, which will be crucial for this summer’s holidays.

“It’s no longer a question of being frugal, or not, that’s not the point. The issue is to allow businesses, industries, to continue to operate within ecosystems that they need,” the French source said, brushing aside German and Dutch reluctance to the idea of common debt.

There continues to be disagreement, however, about the amount of funds needing.

Some argue that the ECB’s private debt buyback programme should be counted in its totality, bringing the ambition down to €1 trillion, or even half that amount if the tools already in place are considered. 

However, with regard to environmental issues, the sources express not much concern, saying that “we can look at conditionalities later, let’s focus on the emergency first”.

(Luísa Meireles and Maria de Deus Rodrigues, | Aline Robert, | Sarantis Michalopoulos |

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