EU lines up $2 trillion for recovery

New proposal worth $826b comes on top of budget outlay to fix economies

The European Commission rolled out its proposal for a massive recovery fund on Wednesday to help member states survive and thrive after the COVID-19 pandemic, but tough negotiations are expected.

The so-called Next Generation EU recovery fund will include 750 billion euros ($826 billion) borrowed from the financial market. With an additional $1.2 trillion from the 2021-27 EU budget, it will bring the total financial firepower to $2 trillion.

"The plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: The European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment," European Commission President Ursula von der Leyen said.

"This is Europe's moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU, we are providing an ambitious answer."

In her speech to the European Parliament on Wednesday, von der Leyen said the plan will "invest in repairing our social fabric, protect our single market, help rebalance sheets across Europe".

According to the plan, Next Generation EU will raise money by temporarily lifting the EU's "own resources" ceiling to 2 percent of EU gross national income, allowing the European Commission to use its strong credit rating to borrow 750 billion euros on the financial market.

Of that total, 500 billion euros will be distributed as grants to those hardest hit by COVID-19 such as Italy and Spain, while the rest will be given to member states as loans.

European Council leaders on April 23 tasked the European Commission with coming up with a proposal to deal with the challenges.

"This is an important step in the decision-making process. It will help target support toward the sectors and regions most affected by the COVID-19 pandemic," European Council President Charles Michel said on Wednesday.

European Council leaders will discuss the proposal in their meeting on June 19.

Michel expressed the view that everything should be done to reach an agreement before the summer break."Our citizens and businesses have been heavily impacted by the pandemic. They need targeted relief without delay," he said.

The proposal was rolled out a week after German Chancellor Angel Merkel and French President Emmanuel Macron set out their proposal for a 500-billion-euro recovery fund as grants to the hardest-hit member states.

'Excellent signal'

Italian Prime Minister Giuseppe Conte on Wednesday called Wednesday's announcement an "excellent signal from Brussels".

The so-called Frugal Four－Austria, the Netherlands, Denmark and Sweden－had earlier opposed such a plan.

In an interview with Politico on Wednesday, Austrian Chancellor Sebastian Kurz said he and other leaders of the group were encouraged by some aspects of the proposal, but cautioned it represents just a "starting point" for negotiations.

"What we find positive, not just myself, but the Netherlands, Sweden and Denmark, is that there is a time limit and that the fund will be a one-time emergency measure and not the first step toward a debt union," he said.

He said considering that there are many in Europe who want such a debt union, it's important that this be clarified in writing once and for all.

Andrus Ansip, a member of the European Parliament and former European Commission vice-president, said von der Leyen's plan will be subject to difficult discussions among European leaders.

"This is an unanimity file, so negotiations will take time. It's difficult to imagine this proposal will be the end state of those negotiations," he said on Twitter on Thursday.