The European Commission will propose later on Wednesday (27 May) an unprecedented fiscal stimulus of €750 billion, mostly made up of grants that do not need to be reimbursed, to overcome the deepest recession in EU history.
“The Commission proposes a €750 billion recovery fund which is added to the common instruments already launched. A European turning point to face an unprecedented crisis,” Economy Commissioner Paolo Gentiloni revealed in a tweet.
Commission President Ursula von der Leyen will present the details of the updated multi-annual financial framework (MFF) and its new recovery fund before the European Parliament this afternoon, after the college of commissioners adopts it.
The recovery fund will include a total of €500 billion given to member states through grants and an additional €250 billion via favourable loans.
It will be part of a revamped MFF proposal, the EU’s long-term budget for 2021-2027, also put forward on Wednesday. It will add another trillion euros to the bloc’s expenditure.
The size of the recovery fund will be aligned with the Franco-German proposal, welcomed by hard-hit countries such as Spain.
But northern member states already rejected offering such a massive volume of grants to ailing economies.
Countries should agree on the main features of the recovery package by the summer, said Eurogroup president Mario Centeno, so it can be up and running on 1 January 2021.
The €750 billion recovery fund (around 5.3% of EU’s GDP) will address a downturn expected to reach -7.4% of GDP in the EU this year, compared with a -4.3% drop registered in 2009, the worst year of the Great Recession.
But in comparison, the resources will far exceed the stimulus that was planned by the Commission in November 2008 to get out of the 2008-2010 crisis.
The Commission’s ‘European Economic Recovery Plan’ put forward at that time proposed a joint EU-member state effort of €200 billion (1.5% of the EU’s GDP).
Von der Leyen’s recovery fund will come on top of the national stimulus and the EU’s liquidity package of €540 billion.
In order to access the funds, the Commission said last week that member states will have to present reform and investment plans aligned with the EU priorities and country-specific recommendations issued by the EU executive.
[Edited by Sam Morgan]