France and Germany on Monday called for a €500 billion recovery fund that would give cash to EU countries impacted by the economic fallout of the coronavirus crisis.
German Chancellor Angela Merkel and French President Emmanuel Macron presented a joint position for the fund, aimed at helping to kick-start all EU economies and avoid distortions in the bloc’s single market.
“That is why we want to set up a temporary fund of €500 billion to provide EU budgetary expenditure — not loans but budgetary expenditure — for the regions and sectors most affected,” Merkel told a news conference.
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The European Commission would borrow money on financial markets to fill the €500 billion cash pot and distribute it to governments through the EU budget. The Commission is scheduled May 27 to come forward with its recovery proposal. All EU governments will need to agree for any plan to take effect.
The fund will provide “EU budgetary expenditure for the most affected sectors and regions on the basis of EU budget programmes and in line with European priorities,” the two governments wrote in their joint statement, pointing to areas like the digital and green transitions and strengthening the competitiveness of the EU’s economies.
The recovery money would be borrowed by raising the EU’s Own Resources ceiling — the maximum amount that can be called upon from member countries — and using it as a guarantee. This arrangement would be given a fixed expiration date and money would be paid back after the next long-term budget, which ends in 2027, according to the statement.