The European Union’s proposed coronavirus recovery fund to help repair the massive economic damage caused should total around €1.5 trillion, EU Economic Affairs Commissioner Paolo Gentiloni said Wednesday (29 April).
“We need a fund worth about 10% of our GDP, that is about 1.5 trillion euros,” Gentiloni told Les Echos daily in an interview.
EU leaders agreed last week that the European Commission should draw up plans for a fund to pay for reconstruction after the coronavirus crisis is over on top of the EU’s multi-year 2021-2027 budget.
The accord notably settled sharp differences between northern EU member states, led by Germany, and their southern partners, led by France and Italy, over how the rescue package should be paid for.
“In my view, this recovery strategy should start in the second half of 2020, and not in December. It is urgent,” Gentiloni was quoted as saying. “Waiting for a year is out of the question,” he added.
“Subsidies will have to be focused on the hardest-hit areas and sectors,” Gentiloni said, adding that loans should have long maturities so as not to burden already debt-ladden states.
It is still not clear if any of the funding will come with economic policy conditions or if it will be in effect made up of loans which will have to be repaid.
“I agree with (European Commission head) Ursula von der Leyen when she says it will be a mixture of the two,” Gentiloni said, adding that any loan should be very long term, perhaps even “perpetual,” meaning that it is not repaid.
Spain supports this idea.
Gentiloni said it will be difficult to find a consensus in the Commission over how the fund will work.
“The devil is in the details and one can say that there will probably be many devils, be they of the amount, the timing or the composition of the fund,” he said.
There is no easy way of resolving such issues but Gentiloni said it was absolutely necessary to act quickly, suggesting a launch in the second half of the year.
“Unless there is a (coronavirus) vaccine, there will never be a time, as in war, when you can say it’s all over,” he said.
“We are going to enter this phase of reconstruction in the next few weeks, living with the virus. And it is during this phase that we need to put in place our recovery strategy. It is out of the question to wait a year to do it.”
Gentiloni also said he did not expect EU rules on deficits to be reactivated for the coming months, but that after the crisis countries will still need a strategy to reduce debt.