4th Jun 2023

EU debates new pandemic-type loans to deal with crisis

  • Commissioner Paolo Gentiloni wants new pandemic type loans to help deal with energy crisis (Photo: European Commission)
Listen to article

Germany's €200bn plan to protect households and businesses from high energy prices was one of the top issues debated at the meetings of finance ministers on Monday and Tuesday.

French, Italian and Hungarian decision-makers all criticised the solo effort as lacking in solidarity, with Hungary's prime minister Viktor Orbán describing it as "cannibalism" which will "break European unity."

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

Following Monday's debates, an op-ed written by Paolo Gentiloni and Thierry Breton, EU commissioners for economy and internal markets respectively, was published in German newspaper Frankfurter Allgemeine.

In it, they called for more solidarity and, notably: a new pandemic-type loan instrument to help less wealthy countries weather energy-driven inflation.

Crisis loans

"We are not blaming member states for supporting their economy," Gentiloni said when asked about the plan at Tuesday's meeting of finance ministers in Luxembourg. "But if we want to avoid fragmentation, I think we need a higher level of solidarity. We need to put in place a 'SURE' mechanism."

The Support to mitigate Unemployment Risks in an Emergency (SURE) mechanism was set up in 2020 in response to the COVID-19 pandemic as a €100bn temporary loan assistance to help countries pay for job support programmes or loan assistance.

Sure was financed with social bonds issued by the commission underpinned by all member states, resulting in capital markets charging near-zero interest rates on ten and 20-year bonds.

Financing conditions typically only available to the wealthiest EU members could then be passed on to all EU countries — with Spain and Italy being the biggest beneficiaries with €21.3m and €27.4m, respectively. As of 2022, a total of €91.8bn in low-interest loans have been disbursed to 19 member states.

Gentiloni and Breton now propose to "be inspired by the Sure program" and set up a similar system for defence and energy spending, which they described as projects of "common European interest."

This would enable countries with less "budgetary leeway" to shield companies and households from high energy prices — a burden which, as some commentators have pointed out, is intensified by Germany's decade-long policy to expand dependence on Russian gas.

Loans, not grants

Unlike Europe's €800bn pandemic fund, which partly consisted of grants underwritten by shared EU debt, Sure consists only of loans.

This could make a similar mechanism more acceptable to frugal governments like the Netherlands, Sweden and Germany, who oppose new shared EU debt associated with grants.

In an interview following the debate on Tuesday, French finance minister Bruno Le Maire outlined a similar system based on loans.

"We are not talking about common debt as we know this would raise issues with some member states," he said. "But there is a need to decide [on a plan] now. Not in the coming weeks, but the coming days."

But it is not yet certain whether a loan-based plan will be supported by a majority of countries.

"Opinions still vary"

"I can confirm that opinions on further EU-wide financing mechanisms still vary," executive vice president Valdis Dombrovikis said on Tuesday.

Wealthier EU members, including Sweden and the Netherlands, prefer to first use the existing €225bn pandemic loans, which have not yet been claimed.

But finance ministers on Tuesday could not agree on how to divide these funds. Other EU reserves (RepowerEU) countries can employ to replace Russian gas imports are not allowed to be used for income support for households and businesses.

This leaves a financing gap between affluent and less moneyed countries.

European leaders will meet again in Prague on Friday to further discuss the war in Ukraine, energy prices and the economic situation.

Putin's energy war opens up north-south rift over EU funds

Putin's energy war put European solidarity to the test at Friday's meeting of EU leaders in Prague, as some countries have been better able to shield households and businesses from energy inflation than others.


New members and energy in focus This WEEK

Sviatlana Tsikhanouskaya, a leader of the democratic forces in Belarus, is expected to address MEPs, while lawmakers will narrow down the finalists for this year's Sakharov Prize for Freedom of Thought.

Latest News

  1. Spanish PM to delay EU presidency speech due to snap election
  2. EU data protection chief launches Frontex investigation
  3. Madrid steps up bid to host EU anti-money laundering hub
  4. How EU leaders should deal with Chinese government repression
  5. MEPs pile on pressure for EU to delay Hungary's presidency
  6. IEA: World 'comfortably' on track for renewables target
  7. Europe's TV union wooing Lavrov for splashy interview
  8. ECB: eurozone home prices could see 'disorderly' fall

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Stakeholders' Highlights

  1. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  2. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  3. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  4. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  5. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  6. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality

Join EUobserver

Support quality EU news

Join us