The biggest economies in Europe threw their burdens behind a plan backed by 500 billion euros ($ 545 billion) in debt to help the region recover from the devastating coronavirus pandemic.
German Chancellor Angela Merkel and French President Emmanuel Macron jointly announced the plan, which would provide grants, not loans, to “the sectors and regions most affected under the EU budget program and in line with European priorities.”
“We, Germany and France, are committed to our responsibility for the EU without and without, and we will help together to pave the way out of the crisis,” they said in a statement. statement. The plan will allow the European Commission to borrow money on financial markets on behalf of the European Union, but also respect EU laws on public debt.
The funds will be used to “increase the resilience, convergence and competitiveness of the European economy, and increase investment especially in the digital and green transitions, strengthen research and innovation,” the statement said.
Former Vice-President of the European Central Bank Vítor Constâncio, called the plan a “good proposal,” in comments on Indonesia. “Funds will be distributed as budget transfers, not grants, prioritizing countries that are more affected and not in line with GDP (or GNI),” he said.
“Repayment will be through annual budget contributions over a long period. It looks like the EU Commission has to borrow long term. Exactly what is needed, “said Constancio, who said he had suggested a fund of € 800 billion but allowed € 500 billion to represent 4% of GDP and” was quite large. ”
“The commission has a triple A rating and if it borrows for 20 years, the total debt service (with amortization) paid through annual state budget contributions will be very low, starting from about 0.2% of GDP and going down,” he said.
Spanish economist Luis Garicano, member of the European Parliament, tweeted that there are positive things about the plan, such as the fact that the plan will be included in the EU budget in 2021 to 2027, therefore “under democratic European control … a change from loans and grants and to 500 billion in expenditure is v. good news. “
The European Union has estimated “Recession of historic proportions this year,” with the 27-nation eurozone economy expected to contract by 7.5% this year, before growing by around 6% in 2021. Some countries are expected to suffer more than others, such as Spain and Italy, whose economies depend on tourism and also most hit by a pandemic in terms of public health.
The economy has just begun to emerge from tight locking, but a plan has been stalled for weeks because of disagreements about how to spread money, with the Dutch budget binder locking the horns with Italy, which has a stronger need to help its economy hit. The plan will require the approval of all member countries.
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