EU agrees €1.8trn of spending for post-coronavirus recovery period

21 Jul 20

EU leaders have agreed a “massive” €750bn Covid-19 recovery package to help the 27 member states’ economies bounce back after the pandemic.

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Merkel and Macron

Angela Merkel and Emmanuel Macron were two of the recovery fund's biggest proponents

 

During their first in-person meeting since the crisis began, the leaders also agreed the EU’s next long-term budget for the period 2021-27, which will be €1.1trn.

The recovery fund, which the European Commission has called ‘Next Generation EU’, will allow the Commission to borrow on the capital markets on behalf of member states for the first time.

The size of the rescue package remains unchanged from early proposals, but it will be made up of more loans – as opposed to grants – than first suggested.

This ratio was the main point of contention between a group consisting of the European Commission, France, Germany, the union’s generally indebted southern members, and a set of fiscally conservative northern European countries led by the Netherlands who became known as the ‘frugals’.

The group settled on €390bn in grants – far less than the €500bn initially mooted by France, Germany and the Commission.

“These were, of course, difficult negotiations in very difficult times for all Europeans – a marathon that ended in success for all 27 member states, but especially for the people,” said Charles Michel, president of the European Council.

“This is a good deal. This is a strong deal. And most importantly, this is the right deal for Europe right now.”

The frugals secured a mechanism to stop transfers to countries not meeting reform conditions in areas such as rule of law – a measure opposed by Hungary – and also larger rebates from the next budget, which the Commission had hoped to phase out after the UK’s exit from the union.

“A massive recovery plan is adopted: a common loan to respond to the crisis in a united manner and invest in our future as we have never done before,” said French president Emmanuel Macron, who went on to hail his work with his German counterpart Angela Merkel in bringing the plan to fruition.

“Since the euro, we have not seen such progress,” he added.

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