EU seeks elusive funding on road to recovery

Recovery plan

On May 27, the European Commission rolled out its proposal for a massive recovery fund to help member states survive and thrive after the pandemic.

The Next Generation EU recovery fund will involve borrowing 750 billion euros from the financial market. With an additional 1.1 trillion euros from the 2021-27 multiannual financial framework, or the EU's long-term budget, the bloc's total financial firepower will stand at 1.85 trillion euros.

Announcing the deal, European Commission President Ursula von der Leyen said, "The plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future." She was referring to the EU's Green Deal, which aims to make the continent the first carbon neutral area in the world by 2050.

"This is Europe's moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU, we are providing an ambitious answer," said von der Leyen, a former German defense minister who took up her position on Dec 1.

Under the plan, Next Generation EU will raise money by temporarily lifting the bloc's "own resources "ceiling to 2 percent of its gross national income, allowing the commission to borrow 750 billion euros on the financial market.

Of that total, 500 billion euros will be distributed in grants to countries hit hardest by COVID-19, such as Italy and Spain, while 250 billion euros will go to member states as loans.

Leaders from the 27 EU member countries will discuss the recovery plan and the long-term budget at a videoconference on Friday, but an agreement, which is required for the recovery fund to go ahead, still appears unlikely.

European Council President Charles Michel said that "discussions will be very difficult and very complex".

The political journalism outlet Politico quoted him on Friday as telling leaders of the European Parliament: "I sense a huge political difficulty. There is no real coming together at the moment."

Michel has urged EU leaders to reach a quick agreement, stating: "Our citizens and businesses have been heavily impacted by the pandemic. They need targeted relief without delay."

The European Council said it hoped Friday's videoconference would "serve as a thorough preparation for a summit at a later date which, if possible, will be a physical meeting".

One major disagreement appears to be with the so-called Frugal Four, comprising the Netherlands, Denmark, Austria and Sweden. These countries want more money to be distributed as loans, rather than grants, while nations such as Italy and Spain have called for a larger proportion of grants.

On Saturday, von der Leyen again appealed for support from EU leaders during a national consultation meeting hosted by Italian Prime Minister Giuseppe Conte.

"Today, we know that we can only defeat this crisis if we do it together. Solidarity is not just the most ethical choice. It is the only effective way to deal with a crisis of this magnitude," she said.