Member states hit hard by Covid-19 would not repay cash under Franco-German plan
Angela Merkel and Emmanuel Macron have proposed that the EU borrows on the financial markets in order to disperse some €500bn (£448bn) through grants to European economies hit hardest by the coronavirus pandemic.
Under the Franco-German proposal the member states receiving the funds would not need to repay the cash. Liability for the debt would instead be added to the EU budget, to which member states contributions vary according to the size and prosperity of their economies.
Should the proposal receive the endorsement of the 25 other member states, it would amount to a significant move towards a level of burden-sharing and fiscal transfers firmly opposed during past crises. The European commission, the EU’s executive arm, would borrow the money under the EU’s name.
Speaking during a virtual press conference with France’s president, Merkel said: “We are convinced that it is not only fair but also necessary to now make available the funds ... that we will then gradually repay through several future European budgets.
“When Germany and France take the initiative, then this encourages the opinion-making process in the EU. We will have to act European in order to get well out of this crisis.”
Macron, who has described the current crisis as a “moment of truth” for the EU, said the bloc had failed to show sufficient solidarity at the start of the pandemic, emphasising that the new cash would be given out in grants rather than loans.
He said: “What is sure is that these €500bn will not be repaid by the beneficiaries … We are proposing to do real transfers [of money] ... that’s a major step.”
Austria’s chancellor Sebastian Kurz nevertheless made clear that the Franco-German initiative would face resistance from some northern EU member states.