European Union leaders unveiled a €750 billion coronavirus recovery plan on Wednesday that would help its continental members navigate the prospect of its deepest recession in more than a quarter-century.
The unprecedented borrowing package, which will require unanimous approval from all 27 E.U. member nations and European Parliament, would provide 500 billion euros in grants and 250 billion euros in loans, worth about US$825 billion in all. The E.U. is the world's biggest economy and trading partner.
The European Commission, the E.U.’s executive branch, proposed leveraging its annual €148 billion budget to issue bonds among international capital markets, then using those proceeds for the economic stimulus, according to a 54-page assessment of economic and investment needs forwarded by commission staff to the European Parliament and E.U. policymakers.
“Today we face our very own defining moment. What started with a virus so small your eyes couldn't see it has become an economic crisis so big that you simply cannot miss it," the commission president, Ursula von der Leyen, told the European Parliament."Our unique model, built over 70 years, is being challenged like never before in our lifetime or our union's history," she said, referring to the Maastricht Treaty formally establishing the E.U. in 1993.
"This is Europe's moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation E.U. we are providing an ambitious answer. The crisis has huge externalities and spillovers across all countries. And none of that can be fixed by any single country alone."
New E.U. financial powers
The commission's proposed "recovery instrument" for nations reeling from the COVID-19 crisis — dubbed the Next Generation E.U. — was proposed as part of the E.U.'s €1.1 trillion budget plan for 2021 to 2027 that leaders and government officials will debate this summer.
Its grants and loans are meant to help especially those nations, such as Italy and Spain, that lack viable financial paths to recovery. But the timing is difficult, as some E.U. economies retreat by as much as 10% this year.
Crucially, France and Germany provided impetus and support for the measure, despite resistance to it among other relatively well-off nations such as Austria, Denmark the Netherlands and Sweden. The proposal closely correlates to a proposal last week by German Chancellor Angela Merkel and French President Emmanuel Macron for a €500 billion recovery fund that would help the worst-hit nations.That proposal also called for the commission to disburse grant money collected from E.U.-issued debt that would be backed by all of the 27-nation bloc's members.
If approved, the commission's proposed new stimulus package would mark the first time the E.U. is given power to raise and disperse money on its own, representing a step towards integration that would be a turnaround from the U.K.’s chaotic departure on February 1 that reduced the membership of the formerly 28-nation bloc.