Merkel said the crisis threatened the cohesion of the European Union. The initiative of the first two European economies was aimed at helping to reach a consensus among all 27 EU member states, he added.
“To support a sustainable recovery that restores and promotes growth in the EU, Germany and France are supporting an ambitious, temporary and targeted recovery fund,” said Merkel, speaking in a video conference.
Charles Michel, President of the European Council of EU National Leaders, had asked for the package to be operational by 1 June. But on May 6 the Commission failed to finalize its proposal.
Differences in whether the fund should provide loans or grants to the hardest hit countries like Italy and Spain blocked progress. Grants or direct money transfers would imply a degree of debt sharing that states like the Netherlands, Austria and Germany have long resisted.
But Merkel and Macron confirmed that, based on their proposal, the European Commission would borrow money to stimulate the EU economy and channel funds through the EU budget to the most affected regions and sectors.
“Given the exceptional nature of the Covid-19 pandemic challenge for economies across the EU, France and Germany propose to allow the European Commission to finance this recovery support by borrowing markets on behalf of the EU,” he added. .
Macron said the EU recovery fund will enjoy support from the European Central Bank. Although the fund has to be repaid over time, this burden would not fall exclusively on those who need help most.
“These 500 billion euros will have to be repaid,” said Macron, but “not by the beneficiaries,” he added.
The economy of the European Union will shrink by a record 7.5% this year, the European Commission warned earlier this month, and the decline could be even more precipitous among the 19 countries that use the euro. .
Ursula von der Leyen, President of the European Commission, welcomed the “constructive proposal made by France and Germany”.
EU Council President Michel called it a “step in the right direction” for the EU.
“I welcome the efforts of Germany and France to find common ground on the recovery fund,” tweeted Michel. “I ask all 27 Member States to work in a spirit of compromise as soon as the European Commission has presented a proposal.”
EU officials warned that the pain could be even worse than expected if the pandemic was more severe and longer lasting than currently expected.
EU leaders have already signed up to at least € 500 billion ($ 538 billion) in immediate bailout, a package that includes wage subsidies to prevent mass layoffs, as well as business loans.
– The reports of Stephanie Halasz, Pierre Buet, Nada Bashir, Rob North and Charles Riley contributed.
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