EU leaders have failed to resolve deep divisions over whether their proposed “recovery fund” will provide sufficient help to embattled member states as they debate the size of the proposed instrument and the amount of cash it will distribute.
EU leaders have failed to resolve deep divisions over whether their proposed “recovery fund” will provide sufficient help to embattled member states as they debate the size of the proposed instrument and the amount of cash it will distribute. Leaders agreed on Thursday night to task the European Commission with creating a “recovery fund” to fuel their economies once the lockdowns ease, but capitals including Paris warned that a programme that simply handed out additional loans, piling debts upon hard-hit member states, would fail to alleviate the deep challenges ahead.
Asked after the meeting about the size of the fund, Ursula von der Leyen, commission president, said “we are not talking about billion, we are talking about trillion”, but she declined to give specifics on the numbers involved. Lucas Guttenberg of the Jacques Delors Centre said there was a temptation for the EU to come up with huge headline figures for the fund, but this needed to be backed with significant transfers of cash to the worst affected countries, not just guarantees for private investment projects and loans that added to their debts. “The question is do we want to create an instrument that gives Italy and Spain significantly more fiscal space?” he said. “That requires a lot more real money on the table.”
Guy Verhofstadt, a former Belgian prime minister who is now an MEP, said piling more loans on embattled countries risked causing a “new sovereign debt crisis”. “Grants are like water in a fire fight while loans are the fuel,” he said.
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