EU leaders unlikely to agree post-coronavirus economic plan on Thursday: sources

Published 21/04/2020 in Business News, Economy & Finance

EU leaders unlikely to agree post-coronavirus economic plan on Thursday: sources

BRUSSELS (Reuters) – European Union leaders meeting are on Thursday expected to defer a final decision on how to finance the bloc’s economic recovery in the aftermath of the coronavirus pandemic, diplomats and officials said.

The 27 national leaders have already clashed over responses to the outbreak across a range of issues, from how to share out medical equipment to ways of cushioning the economic hit.

They are now at loggerheads over how to kickstart growth once the epidemic ends, notably over whether the funds for that scheme should be raised jointly – in broad terms advocated by southern nations – or by each country individually, which the richer northern states favor.

The European Commision told national leaders’ envoys on Monday that it wanted to finance the recovery fund via increased headroom in the bloc’s joint budget for 2021-27, the sources told Reuters on Tuesday.

The Brussels-based executive would seek a temporary increase for 2021-22 of guarantees by member states for the budget’s resources, giving it leeway to raise more cash against that, said the sources who participated in the discussion or were briefed on it.

Chancellor Angela Merkel on Monday signaled Germany’s readiness to finance economic recovery through a bigger EU budget and the issuance of joint debt via the Commission.

That is likely to bolster the Commission’s plan, but many details are missing.

A point of contention in Monday’s discussion was whether extra money raised would come as grants, which would not need to be repaid by member states, or loans that would have to be redeemed, the sources said.

The size of the recovery fund is also unclear, according to the sources. Spain has called for a fund worth 1.5 trillion euros, around three times the figure estimated by the head of the euro zone’s bailout fund.

Thursday’s video summit was therefore more likely to just task the Commission to work out the recovery fund proposal in more detail, the sources said.

The Commission estimated the coronavirus could wipe off as much as a tenth off the bloc’s economic output.

It also said it wanted to increase cohesion funds, the development handouts covered by the wealthier EU countries to help their worse-off peers catch up, the sources said.

The Commission plans to present an updated draft of the 2021-27 budget on April 29 and it would have to be approve by all the 27 national capitals to take effect from next year.

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