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EU looking for compromise on recovery plan

The European Commission will propose a recovery plan of up to 1,000 billion euros on Wednesday to overcome the crisis caused by the coronavirus. This proposal will mark the start of difficult negotiations between divided Europeans on financial solidarity.

The European Commission will propose a recovery plan of up to 1,000 billion euros on Wednesday to overcome the crisis caused by the coronavirus. This proposal will mark the start of difficult negotiations between divided Europeans on financial solidarity.

(AFP) – The positions were clarified when Paris and Berlin proposed a week ago a 500 billion euro plan, via an original mechanism of pooling of European debt. A surprising change in doctrine on the part of Berlin, long hostile to this idea. Chancellor Angela Merkel could also play a key role in the discussions because “it can negotiate in a spirit of cooperation with countries which are close to Germany on the limits to solidarity” between Member States, underlines Anne-Laure Delatte, adviser at Cepii study center.

A common debt is indeed rejected by the countries of the North, who criticize their lax budget to their partners in Southern Europe, the most affected by the pandemic but also the most indebted, and for whom it is more expensive to borrow . The proposal presented by Emmanuel Macron and Angela Merkel provides that the European Commission finances the recovery by borrowing on the markets “on behalf of the EU”, and that the money is then transferred in the form of endowments, not loans, to most affected countries and sectors and regions. A perspective opposed by the so-called “frugal” countries (Netherlands, Austria, Denmark and Sweden).

A Franco-German agreement is absolutely necessary but it is not enough

The Franco-German contribution was welcomed by the President of the Commission, Ursula von der Leyen. But the stimulus fund that it must offer will not be “copied and pasted”, warned its spokesperson: it must make a “summary” likely to satisfy all member states. The“Stimulus” that it will present to the European Parliament on Wednesday, is linked to the multiannual budget project (2021-2027) and must allow raise up to 1,000 billion euros, thanks to guarantees requested from member states, according to European sources. Half of the funds would be allocated to loans and the rest to aid and direct funding for programs.

This “stimulus instrument” will be added to the 240 billion euros in loans from the European Stability Mechanism (ESM, euro zone relief funds), to the 200 billion euros for the guarantee fund for businesses and to the 100 billion euros the SURE instrument created to support partial unemployment. “A Franco-German agreement is absolutely necessary, but it is not enough. We need to bring the whole of the EU together, “said European Foreign Minister Josep Borrell on Monday. “There are big divisions among member states on many issues.”

Unanimity of 27 is required

The four “frugals”, hostile to subsidies, voted for loans at favorable rates, within two years, and under certain conditions. These countries also want to limit the amount of the European budget and keep the discounts they benefit from as net contributors. The President of the European Parliament, the Italian David Sassoli, called on these four countries to live up to “the gravity of the challenges we face”. “Everyone benefits from the EU single market, and the countries that have raised objections are among those who have benefited the most,” he said.

Unanimity of 27 is required for the adoption of the long-term budget and the stimulus fund which is backed by it. “There is political room for maneuver”, judges Anne-Laure Delatte. For Marta Pilati, of the European Policy Center (EPC), a compromise is possible but “very unlikely” before the summer. The countries of the East “will try to protect the budgets from which they benefit, cohesion and agriculture”, and condition their agreement to the stimulus fund to the abandonment of any link between European funding and respect for the rule of law, also highlights the EPC expert.

Even if “in the best of cases” we had “an agreement on the stimulus fund during the summer”, Shahin Vallée, of the German institute of foreign policy DGAP, judges “very improbable that we can issue debt common “in this context” before October 2021 “, given the need for ratification by all national parliaments.


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