European Union (EU) leaders have finally reached an agreement after almost five days of fraught discussions on a huge post coronavirus recovery package. The package involves 750bn euros which will be given as grants and loans over a period of seven years to the 27-member bloc to counter the impact of coronavirus pandemic. it’s the joint biggest borrowing ever agreed by the European Union.
What is the European Union budget? To finance policies at the European level the European Union has a budget. It is mainly is an investment budget and represents around 2% of all public spending in the EU. It implements priorities agreed upon by all the EU members which in line with the principle of proportionality and subsidiarity adds more effectiveness to EU nations then actions taken at the local, regional, or national level. The commission, the parliament and the council all have a say on how the budget will be allocated and what will be the size of the budget.
The European Commission will borrow the money and give half (390 billion euros) of it as grants to the nations hardest hit by the pandemic including Italy and Spain and the rest (360 billion euros) will be given as loans. A new European budget was also agreed by the leaders of nearly 1.1 trillion euros from 2021 through 2027 which will create a combined spending power of 1.8 trillion euros.
The EU leaders said in a joint declaration that this ambitious and comprehensive package combines the classical budget with a special recovery package designed to overcome the effects of the pandemic and is in the best interest of the European Union. The focus of the coronavirus recovery package is to provide funding on three pillars including investing to help protect from any similar crisis in the future, helping businesses to rebound from the effects of the pandemic, and rolling out new measures to reform economies over the long haul.
The decision was made after days of deadlock and talks that can be described as one of the most bitterly divided in years.
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The EU is facing a big recession due to the pandemic and the hardest-hit countries need some economic and financial relief. The European Commission predicted a 7.4% slump IN 2020 in the EU economy but now it has risen to 8.3% which is considerably worse.
Before today there were some disagreements regarding the conditions attached to the package, the overall size of the fund, and the mix of grants and loans.
The original plan of the commission included the coronavirus recovery package to be 500 billion euros which were to be distributed as grants and the remaining 250 billion as loans but the size of grants was contested by the so-called frugal countries, which include Netherlands, Sweden, Austria, and Denmark, as they were worried that funding the spending of other governments will burden them with debts.
The frugal nations were given the promise of rebates on their contributions to the EU budget which eventually won them over. French President Emmanuel Macron at one point banged his fists on the table as he believed that the frugal four were putting the European project in danger.
President of the European Council Charles Michel said at a press conference on Tuesday that this is a good and a strong deal and most importantly the right deal for Europe right now. He also said that it is the first time all European Union nations were jointly working to support each other against the crisis.