‘Whatever it takes’ was the message from European Commission President Ursula von der Leyen on Wednesday (27 May) as the EU unveiled an ambitious recovery plan to help its members who have been worst affected by the coronavirus pandemic.
“Our willingness to act must live up to the challenges we are all facing,” von der Leyen told the European Parliament.
A €750 billion stimulus package, built largely around non-refundable grants, will sit alongside a credit-card bashing €1.1 trillion EU budget for 2021-2027 and sends a clear signal that the much-talked-about (and seldom delivered) European ‘solidarity’ still exists.
Combined with the €750 billion of liquidity offered to governments and companies by the European Central Bank, and national treasuries’ own rescue programmes, Italy, Spain and others should be able to finance recoveries from the pandemic-induced recession.
The new recovery fund will include a total of €500 billion of grants, while the rest will be offered to governments via loans on favourable terms.
The Commission’s borrowing plans may be controversial to some, but they are essential to shield governments from market pressure. The new debts being accumulated will take decades to repay and without support, many governments face the ominous prospect of the bond market breathing down their neck.
The UK is, for the first time in several decades, facing market pressure because of the Bank of England’s plans to buy bonds and, potentially, write off debt.
Of course, the von der Leyen proposal is just that, and it has had a cool reception from several northern member states mostly because of the grant component.
Recent history suggests that the Commission will also have to compromise on its plans to finance its spending with new common taxes
Von der Leyen’s plea that the details on this wallet-busting recovery deal be resolved by the summer looks extremely optimistic. It is hard to imagine that all of these tools will survive the negotiation process or be operational from next January.
But, as was the case when, with just three words [‘whatever it takes‘], European Central Bank boss Mario Draghi calmed the financial markets fretting about the eurozone’s fate, words and symbols matter. European stock markets have already reacted positively today.
Whatever their grievances, the Commission plan will now shape the debate and is close enough to last week’s Merkel-Macron blueprint – which had a similar number of noughts after the eurosign – to form the basis for an agreement.
Von der Leyen’s message was that leaders are not going to be pushed around and that the EU will survive this crisis. There will certainly be bumps in the road, but there is a final destination in sight.
Now that many European countries have started lifting lockdown measures, make sure you stay up to date with EURACTIV’s comprehensive overview, which is regularly updated by our pan-European network of offices and media partners.
To sum up: the Commission proposed 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 plan comes with green strings attached and could be covered financially by new sources of revenue, which could include extending the EU’s carbon market to the aviation and shipping sectors.
The EU executive is also considering bringing back Europe-wide plans for a digital services tax to finance the fund and has doubled down on some aspects of its agri-funding.
In a fresh €8 billion aid package for the auto industry, French President Emmanuel Macron proposes increased subsidies for electric car purchases and encouraged manufacturers to relocate their factories back to France.
In Germany, states are in disagreement on when to end coronavirus restrictions, sidelining the federal government in a move that could possibly herald the end of the country’s relatively harmonious federal coronavirus cooperation, EURACTIV Germany reports.
A virtual donors conference in solidarity with Venezuelan refugees and migrants raised €3.1 billion to assist in what the EU said is a displacement crisis second in gravity only to the crisis in Syria.
A lesson to be learned from the COVID-19 pandemic is that Europe should switch to a community-based healthcare model with the enhanced use of new technologies, a multinational pharmaceutical company told EURACTIV.
France’s Secretary of State for Digital defended the rollout and use of the country’s planned coronavirus contact tracing app ahead of a crunch vote on the technology today (27 May).
The EU should adopt a ‘Magnitsky-style’ framework for human rights abuses for a firm stance against China’s recent plans for national security legislation in Hong Kong, a leading pro-democracy activist said.
Look out for…
- Commissioner Kyriakides participates in a videoconference of the G7 Health Ministers
- Video-conference of EU-US Justice and Home Affairs ministers
Views are the author’s
[Edited by Zoran Radosavljevic and Sam Morgan]