‘Frugal Four’ present counter-plan to Macron-Merkel EU recovery scheme

Unlike the Merkel-Macron plan, the money must be repayable. Under the principle "Loans for Loans", funds from the capital market are to be redistributed as loans, which are to be cheap but not free of charge. That is because the "Frugal Four" definitely do not want to see debt communitised. EPA-EFE/IAN LANGSDON

The “Frugal Four” (Austria, Denmark, the Netherlands and Sweden) presented their own draft for an EU recovery fund in a ‘non-paper’ sent to the EU capitals on Saturday (23 May). The most important point: aid money must be repaid. EURACTIV Germany reports.

It is a response to a Franco-German initiative presented by German Chancellor Angela Merkel and French President Emmanuel Macron last Monday (18 May), worth some €500 billion and filled with money from the capital markets.

The European Commission would take on this debt in the form of joint bonds with a long maturity, with EU countries assuming liability, and aid money from this fund would not have to be repaid.

Austrian Chancellor Sebastian Kurz rejected this proposal via Twitter only hours after it was presented, speaking on behalf of the “Frugal Four”. The next day (19 May) he announced a joint counter-proposal, which has now seen the light of day.

MEP: Macron led Germany to decisions previously ‘unthinkable’

The recent Franco-German proposal for a €500 billion Recovery Fund is the result of French President Emmanuel Macron’s “turning point” last April, MEP Sandro Gozi told EURACTIV.it in an interview.

“I place a lot of hope in the European action …

No debt mutualisation

The new draft is very similar to the Merkel-Macron plan in its basic features: the “Frugal Four” also want a common fund from which aid money should go to economic segments that are particularly affected by the coronavirus crisis.

Investments would be funnelled into research, innovation and health, as well as the green transformation and digital agenda.

However, unlike the Merkel-Macron plan, the money must be repayable. Under the principle “Loans for Loans”, funds from the capital markets are to be redistributed as loans, which should be cheap but not free of charge. That is because the “Frugal Four” do not want to see debt mutualised.

Another difference with the Franco-German initiative is the tighter timeframe for the fund. Merkel spoke of three years in which money will be paid out, while the four frugals want to close the tap after two years.

EU recovery funds will come with strings attached 

The EU’s unprecedented stimulus to recover from the COVID-19 pandemic will come with certain conditions which should reflect the extraordinary nature of this crisis and the European goals, senior MEPs and diplomats have said

Anticipating the European Commission

Italy, which has been heavily hit by the pandemic and has struggled with public finances for years, has already sharply criticised the alternative draft. European Affairs Minister Enzo Amendola described it as “defensive and inappropriate”.

The ball is now in the court of the Commission. Since the last EU summit at the end of April, the EU executive has been working on a recovery fund concept that it will present on Wednesday (27 May), together with its new EU budget proposal.

The Merkel-Macron plan was anticipated by the Commission in some aspects and compatible with many of its own ideas, President Ursula von der Leyen said in a statement. But she also stressed that her proposal “will take into account the views of all member states and the European Parliament.”

[Edited by Zoran Radosavljevic and Sam Morgan]

Subscribe to our newsletters