EU leaders back trillion-euro recovery plan

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.