Germany and France propose €500 billion recovery fund
By ECCT staff writers
Germany and France have jointly proposed a €500 billion recovery fund to be distributed to EU countries worst affected by the coronavirus pandemic.
In talks today, French President Emmanuel Macron and German Chancellor Angela Merkel agreed that the funds should be provided as grants. The proposal represents a significant shift in Merkel's position and comes after accusations of a lack of EU solidarity by countries worst hit by the pandemic.
Germany had previously rejected the idea of nations sharing debt but, under the new proposal, funds would be raised by the European Commission borrowing on capital markets, which would be repaid gradually from the EU's overall budget.
The two leaders said that grants provided by the proposed recovery fund should also be used to help finance the bloc's investment in a “greener future”, which is in line with the policy direction of European Commission President Ursula von der Leyen’s “Green Deal”, which also has the support of the majority in the European Parliament.
European Central Bank (ECB) President Christine Lagarde has also said that the plan was "ambitious, targeted and welcome".
However, the plan still faces resistance. Austrian chancellor Sebastian Kurz said that he, together with his Dutch, Danish and Swedish counterparts were only prepared to accept a rescue fund that gave out loans. While the French-German proposal has increased optimism in Brussels that a deal among the 27 EU member states has become more likely, European Council president Charles Michel will have to broker a final agreement among the member states at a summit, which has yet to be scheduled.