BRUSSELS—The European Unions executive unveiled a 750 billion euro plan ($823 billion) on May 27 to prop up economies hammered by the CCP (Chinese Communist Party) virus, hoping to end months of squabbling over how to fund a recovery that exposed faultlines across the 27-nation bloc.
The blueprint received an initial positive reaction from Paris, Berlin, Rome, and Madrid, as well as the European Parliament, and the chairman of EU leaders said they should aim to finalize an agreement before the summer break.
Under the proposal, which could still be blocked by more frugal northern nations, the European Commission would borrow the funds from the market and then disburse two-thirds in grants and the rest in loans to cushion the unprecedented slump expected this year due to lockdowns.
Much of the money would go to Italy and Spain, the EU nations worst affected by the pandemic.
“We either all go it alone, leaving countries, regions, and people behind and accepting a union of haves and have-nots, or we walk that road together,” said Commission head, Ursula von der Leyen.
EU leaders agree that, if they fail to rescue economies now in freefall, they risk something worse than their debt crisis of a decade ago, which threatened to pull the eurozone apart.
But fiscally conservative northern countries have resisted pressure from a “Club Med” group to take on mutual debt to protect the EUs single market of 450 million people from being splintered by divergent economic growth and wealth levels.
The grants are needed because Italy, Spain, Greece, France, and Portugal already have high debt and rely heavily on tourism, hit hard by the pandemic.
The euro rose as von der Leyen detailed the plan—”Europes Moment: Repair and Prepare for the Next Generation.”
The plan aims to fulfill the Commissions pledge to slash EU carbon emissions to “net zero” in 2050, beef up EU health and defense capability, and prop up firms facing solvency problems.
The recovery fund comes in addition to the EUs long-term budget for 2021-27, which the Commission proposed to set at 1.1 trillion euros ($1.21 trillion). While some stimulus spending could start as soon as this autumn, most would come from 2021.
The plan needs unanimous backing of the 27 EU states and the European Parliament. EU leaders chairman Charles Michel said they would first discuss it on June 19.
“It is clear there are difficult talks ahead,” German Chancellor Angela Merkel said. Her finance minister saw “very high” chances for a deal.