Tuesday

20th Oct 2020

Coronavirus

EU leaders back trillion-euro recovery plan

  • EU commission preisdent Ursula von der Leyen and EU council chief Charles Michel after the videoconference of leaders (Photo: Council of the European Union)

EU leaders on Thursday (23 April) agreed to a recovery fund to help Europe's economy, as the coronavirus pandemic is sending it into a steep decline, and that it will be linked to the EU's long-term budget.

But leaders, meeting via videoconference, left crucial details on the size, its precise relation to the budget, and its financing to the commission.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

European Commission president Ursula von der Leyen told reporters that the commission will come up with concrete proposals in the second or third week of May.

EU Council president Charles Michel said after the meeting that the fund should be "of a sufficient magnitude, targeted towards the sectors and geographical parts of Europe most affected".

The size of the EU budget will need to increase, von der Leyen added, which has so far been set around €1 trillion, .

"We need to increase its firepower to be able to generate the necessary investments across the whole EU and therefore we will propose to increase the so-called headroom," she said.

"Our current estimates of the needs lead us to think that an own-resources ceiling of around 2 percent of GNI [gross national income] for two or three years instead of the 1.2 percent will be required," she added.

This means member states agreed to allow the commission to handle more money in the budget, which could be used to raise funds against it.

The commission president said on the money possibly raised "we are not talking about billion, we are talking about trillion".

Von der Leyen said the commission will examine "innovative financial instruments in the next budget".

The commission chief said there would have to be a "sound balance" between grants and loans for the countries most in need of support, but that it will have to be negotiated by member states.

France and Spain are arguing that the recovery should be funded by grants so that it does not add to the debt pile, while the Netherlands and Austria are among those arguing for loans.

Borrowing costs are on the rise in worse-effected and indebted countries such as Italy, and Spain, and European Central Bank governor Christine Lagarde told leaders the pandemic could cost them between 5 percent and up to 15 percent of their economic output.

Germany's chancellor Angela Merkel told fellow leaders her country is willing to significantly increase its contribution to the common budget.

Handshake?

Member states have been deeply divided over the the 2021-2027 budget, making any agreement on the recovery plan difficult as well.

That decision might have to come when leaders can meet physically later on as the virus outbreak slowly comes under control in Europe and confinement measures are eased.

While EU leaders have held their fourth videoconference since the pandemic has forced the EU into a lockdown, sensitive political decisions and budget deals are traditionally done in person.

This means the recovery fund would only kick in from next year, and that agreement on it might only come during or after the summer.

While that might seem slow given the immediate corona crisis, compared to the debt crisis a decade ago, the EU now moves fast.

On Thursday, some member states asked to bridge the gap until next year, and von der Leyen said the commission will look into it.

She added, however, that the EU countries and the bloc's institutions have already put forward €3.3 trillion to stabilise the European economy.

Unthinkable

EU leaders on Thursday also backed an agreement reached earlier by their finance ministers on a €540bn package to help businesses and workers, and allow countries to tap into the EU's rescue fund with light conditions attached to deal with the immediate costs of the crisis.

"The well-being of each EU member state depends on the well-being of the whole of the EU," Michel said, as the two EU chiefs argued for solidarity so that the EU's internal market does not fragment.

"We have made great progress, unthinkable until a few weeks ago," Italy's prime minister Giuseppe Conte said after the meeting.

EU corona recovery talks could drag into summer

EU leaders hold a videoconference Thursday to bridge divisions over financing Europe's recovery from the corona crisis, in talks interlinked with the bloc's long-term budget.

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

EU leaders at odds on virus-hit economy

Italy, with the backing of France and Spain, call for substantial EU economic help, others want to see how long the outbreak will last before committing to big plans.

German court questions bond-buying and EU legal regime

The German Constitutional court ordered the European Central Bank to explain its 2015 bond-buying scheme that helped eurozone stay afloat - otherwise the German Bundesbank will not be allowed to take part.

EU tries to avoid lockdowns as global death toll reaches 1m

Several member states are putting forward restrictive Covid-19-related measures to try to control the surge of numbers of coronavirus cases, trying to avoid a second lockdown. Meanwhile, the global death toll from the novel coronavirus has reached one million.

Stakeholders' Highlights

  1. UNESDAMaking healthier diets the easy choice
  2. Nordic Council of MinistersUN Secretary General to meet with Nordic Council on COVID-19
  3. UNESDAWell-designed Deposit Return Schemes can help reach Single-Use Plastics Directive targets
  4. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  5. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  6. UNESDAReducing packaging waste – a huge opportunity for circularity

Latest News

  1. EU money used by neo-Nazi to promote Holocaust denial
  2. Over 80% of Europe's habitats in poor or bad condition
  3. EU's Brexit move could end deadlock in talks
  4. EU's migrants more at risk from coronavirus
  5. Baltics pin hopes on Biden
  6. France marks trauma of history teacher's murder
  7. Spain's Sanchez in storm over judicial appointments bill
  8. Violating promises and law, von der Leyen tests patience

Join EUobserver

Support quality EU news

Join us