France and Germany have agreed on establishing a joint European recovery fund amounting to €500 billion (US$543 billion) that will be given out as grants to the economic sectors and regions most affected by the Covid-19 pandemic.
German Chancellor Angela Merkel and French President Emmanuel Macron have announced a joint initiative aimed at helping the European Union recover from the devastation the novel coronavirus pandemic has inflicted on its economy. The plan involves allocating a vast sum for the specialized recovery fund within the next Multiannual Financial Framework (MFF) – a seven-year program regulating annual EU budgets.
The fund “will be used in a targeted manner to meet the challenges of the pandemic and its aftermath,” says the statement, which was published separately by Berlin and Paris. During the joint press conference with Merkel, Macron also said that the money would be given out in the form of grants, rather than loans. However, the chancellor maintained that the money would need to be reimbursed “through several future European budgets.
The initiative immediately received support from the EU Commission head, Ursula von der Leyen, who said it “rightly puts the emphasis on the need to work on a solution with the European budget at its core.”
A clear step forward in Macron Merkel initiative- 500 bn fund- Borrowed by the Commission- Not in loans, but direct spending (!)- Will go in the EU budget 21-27, thus under democratic European control. Change from loans and grants and to 500bn in expenditure is v. good news
— Luis Garicano (@lugaricano) May 18, 2020
If supported by other EU members, it would bolster the existing EU solidarity fund of €500 million ($543 million), designed for dealing with major disaster, by a whopping 1,000 times. It also appears to be a way out of an impasse in talks between the two European grandees on the joint coronavirus relief mechanism.
The issue has lately become a major source of discord in the bloc, ever since the most affected member states, including Italy and Spain, have been calling for the issuing of joint eurobonds. The idea was supported by Paris, but faced staunch opposition from Berlin and Amsterdam, as Europe’s more affluent nations were extremely reluctant to share the debt with those worst affected by the pandemic.
Now the plan has to be backed by other EU members. The MFF should be unanimously approved by the EU Council, which consists of ministers who represent member states and receive the consent of the EU parliament.
The talks on the 2021–2027 MFF, which is set to include the recovery fund, stalled in February as European nations closed borders and imposed quarantine measures in a bid to stall the spread of the virus. Whether Berlin and Paris would be able to convince fiscally conservative nations such as the Netherlands to support the initiative is still an open question.
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