EU leaders clinch stimulus package
July 21, 2020 - European Union leaders have finally agreed a €1.824 trillion deal, including a €750 billion coronavirus recovery fund -- dubbed Next Generation EU -- to be borrowed from capital markets.
German Chancellor Angela Merkel and French President Emmanuel Macron drafted the proposal in May. The €390bn grants component of the recovery package is considerably less than the €500bn recommended in the original plan. The remaining €360bn in repayable loans is to facilitate recovery in member states.
The core component of the grants -- worth €312.5bn -- has been dubbed the EU’s Recovery and Resilience Facility and will be distributed from 2021 to 2023 to member states that pledge to reform their economies. Other EU budgetary programmes will use the remaining €77.5bn of grants.
Italy will be the biggest beneficiary from the plan and expects to receive about €82bn in grants and about €127bn in loans.
Member states must agree to hand over new environmental and digital taxes -- dubbed Own Resources -- to help finance the debt. All liabilities are to be repaid by the end of 2058.
The entire package includes the EU’s next seven-year budget, or Multiannual Financial Framework, which will be worth €1,074bn and run from 2021-27.
Among the most contentious elements were rebates secured by “frugal states” and Germany against their regular budget contributions.
The Netherlands, Austria, Finland, Sweden and Denmark opposed borrowing for grants but accepted rebates. Austria’s refund doubled to €565 million a year, while the Netherlands’ will jump to €1.92bn from €1.57bn. Denmark’s rebate increases from €134m to €403m per year.
The European Parliament will play a key role in ratifying the package -- over which MEPs have a binding say.
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