Friday 14 May 2021
Home ECB Four-country plan for corona fund: on collision course or shot for EU bow

Four-country plan for corona fund: on collision course or shot for EU bow

The Netherlands, together with Austria, Sweden and Denmark, has presented its own proposals for a European corona recovery fund. This four-country plan is in major parts diametrically opposed to the recently published Franco-German proposal.

The "miserly four" proposal can be seen as a response to the compromise presented last week by French President Macron and German Chancellor Angela Merkel. This means that two proposals are now on the negotiating table in Brussels.

Politically-administrative, the focus in EU forums after the previous emergency measures is now on reconstruction. However, the prospects are bleak. The economy is shrinking on average by 7.4 percent. Despite this imminent recession, the EU has long battled over the financing of a reconstruction plan. Well-known faults arose again between north and south and between rich and poor.

In this situation, Emmanuel Macron and Angela Merkel took the initiative last week. They proposed a € 500 billion reconstruction fund, including some other EU adjustments. The EU Commission must raise the money on the capital market and the Member States will repay it together.

The four countries' proposal comes ahead of the revised multi-annual EU budget to pave the way for amassing hundreds of billions for economic recovery. Countries in southern Europe have been particularly hard hit by the corona crisis. The Netherlands previously received sharp criticism from the southern countries because The Hague would be much too rigid. The Netherlands is reluctant to give many billions without conditions.

On Wednesday, Commission President Ursula von der Leyen will present a revision of the EU multi-year estimate 2021-2027. The four countries advocate a temporary, one-off emergency fund. That fund would then fall outside the regular EU budget, and thus outside the EU laws and EU powers. The European Parliament would have nothing to say about that either. Badly hit EU countries can apply for a loan from this fund for a maximum of two years.

Amounts are not (yet?) Mentioned. First, the European Commission has to find out exactly how much money is needed. Affected countries that want money must come up with a recovery plan themselves. Merkel and Macron's support plan is not intended as a loan, but as a subsidy or gift. As far as they are concerned, the permitted debt burden in Europe may be increased. The foursome doesn't want that.

According to Merkel, it is an "extraordinary one-off effort" to support the hardest-hit countries. Also, the four countries do not want to contribute extra money to the multi-year budget of the EU. They want this budget to continue for seven years and for the two-year recovery fund to temporarily run alongside it.

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