EU recovery fund should hit €1.5 trillion, Gentiloni says

EU Commissioner for the economy, Paolo Gentiloni, speaks to reporters on the bloc's response to the COVID-19 disease during a press conference at the EU's Emergency Response Coordination Centre (ERCC) in Brussels, Belgium, 02 March 2020. [EPA-EFE/STEPHANIE LECOCQ]

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.

EU leaders agree plans for 'unprecedented' stimulus against pandemic 

EU leaders have tasked the European Commission with designing the recovery plan for the deep economic crisis that the coronavirus COVID-19 will cause in Europe.

Conditions

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.

Questions remain over green aspects of EU recovery plan

EU leaders on Thursday (23 April) tasked the European Commission with drafting a trillion-euro “recovery fund” linked to the EU budget but didn’t specify how it will support the green transition they claim to be committed to.

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