European Commission to present recovery plan

European Commission President Ursula von der Leyen will today present a proposal to use funds from the EU budget to

EU RAND

Photo: RAND Corporation

European Commission President Ursula von der Leyen will today present a proposal to use funds from the EU budget to counter the economic downturn resulting from the COVID-19 pandemic.

The plan is expected to include a €500 billion grants-based EU recovery fund backed by France and Germany. However, the proposal has already seen some opposition, most notably from the so-called Frugal Four—Austria, Denmark, the Netherlands and Sweden—which has put forward a counter-proposal opposing grants and endorsing a “loans for loans” approach.

Because France and Germany hold significant financial sway in the bloc, it is likely that the EC plan will include the proposed recovery fund. Still, €500 billion amounts to only 3% of EU GDP and, with smaller economies exerting pressure, the final package will likely include a combination of grants and loans and therefore be significantly diluted in its final form. This will have wider political implications for countries worst hit by the pandemic like Italy and, in the longer term, potentially reenergise euroscepticism across the bloc.

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