The European Commission on Wednesday unveiled a huge €750bn (£657bn) coronavirus recovery plan, pledging to disburse hundreds of billions to the countries worst affected by the pandemic.
Of the total amount, €500 billion will be distributed in the form of grants to member states, and €250 billion could be available in loans, according to an unnamed official who spoke to the Irish Times, in line with policy. To fund the package, the EU would reportedly borrow up to €750 billion on financial markets.
In a statement on its website, the EU governing body proposed the creation of a new recovery instrument, dubbed Next Generation EU, to address the economic damage caused by the outbreak.
“Next Generation EU of €750 billion as well as targeted reinforcements to the long-term EU budget for 2021-2027 will bring the total financial firepower of the EU budget to €1.85 trillion,” the statement said.
Economies across the 27-nation EU bloc have been ravaged by the Covid-19 pandemic, but several southern states had big debts even before the crisis.
Commission President Ursula von der Leyen said "this is Europe's moment".
"Things we take for granted are being questioned. None of that can be fixed by any single country alone," she told the European Parliament. "This is about all of us and it is way bigger than any of us."
If approved by member states, the plan may represent a leap forward in integration in the European Union, as the funds would be raised through jointly guaranteed debt to pay for a programme likened to a new “Marshall Plan”.
Member states must apply for the grant money by proposing investment and reform schemes that it would be spend on that make progress towards joint EU priorities, such as digitalisation and transforming economies to cut carbon emissions to avoid catastrophic climate change
The money raised on the capital markets would be paid back over 30 years between 2028 and 2058, but not later.
The Commission said the money could be paid back in a number of ways including introducing a carbon tax based on the Emissions Trading Scheme, a digital tax or a tax on non recycled plastics.
Commissioner Maros Sefcovic says recovery has to be based on green and digital policies as well as "increased resilience" and lessons learned from the Covid-19 crisis, as reported by the BBC.
Countries such as Germany, France, Italy and Spain have welcomed the proposals while several “frugal states” have objected to taking on debt for other countries.
Austria, Denmark, the Netherlands, and Sweden — known as the "frugal four" — have protested that proposal, saying the aid should instead come in the form of low-interest loans. They have said they would not agree to a mutualization of debt nor to an increase in the EU budget.