After a four-hour teleconference on April 23, EU leaders asked the European Commission to lead on the recovery plan for the coming economic crisis. “Tensions, if they were there at all, are not there any longer,” Dutch prime minister Mark Rutte said after the video call.
Leaders have not outlined much detail on the economic response to the deepest economic crisis the EU has ever experienced. European Central Bank President Christine Lagarde told EU leaders that, in the worst case scenario, the eurozone’s GDP could decline by 15% . The middle scenario would be a 9% drop, sources told EURACTIV.com.
Charles Michel, European Council president, said leaders backed an “unprecedented investment effort.” Differences center on the size and the type of instruments to channel the funds (grants or loans). The proposal will be part of the updated draft of the multi-year budget for 2021-2027 due around May 1.
The Eurogroup has already approved €540 billion in liquidity for countries, rubber-stamped by the leaders on Thursday. Ursula von der Leyen, the President of the European Commission, said she will propose increasing the ceiling of the EU’s resources from 1.2% of the EU’s GNI to 2% to finance the package.
“This whole endeavour is about protecting the integrity of our single market and our Union, and If we succeed, then the investments would have been worth every cent we pay for them now,” von der Leyen said.
A Commission internal document suggested that the stimulus needed should reach around €2 trillion. The Commission’s issuance of debt could be a precursor to the mutualisation of debt (the so-called ‘coronabonds’), amongst Eurogroup countries, including Spain, Italy and France, and the half a dozen governments that have always opposed Eurobonds, such as Germany and The Netherlands.
Member states have not agreed on the recovery should be through loans or grants. Spain and other countries called for grants to avoid member states increasing their debt.
Giuseppe Conte, Italian prime minister, supported Madrid during the conference call. “Grants are essential to preserve the single market, a level playing field, and to ensure a symmetric response to a symmetric shock”, he told the leaders.
Rutte argued for a loan-based system, warning “it will take time” to flesh out the details.
Michel said leaders had “very rational debate” with a “real sense of urgency,” and that he was “optimistic because even if it is difficult, I feel there is a strong political will to act together.”
Emmanuel Macron, French President, noted the existing disagreements. “Some countries have made efforts, others are under domestic political constraints,” he explained, calling for a “strong and united response” across the eurozone.