German chancellor Angela Merkel and French president Emmanuel Macron have outlined a joint initiative to help drive the European Union’s recovery from the economic damage of the coronavirus crisis.
Merkel and Macron jointly proposed a €500bn (£445bn, $543bn) economic recovery fund that could offer grants to the hardest-hit regions and sectors, the leaders announced at a joint virtual press conference on Monday (18 May).
They proposed that the European Commission would be authorised to borrow the money on the financial markets. All 27 EU member countries would have to approve the fund.
“Such a crisis demands a corresponding response,” Merkel said, adding that the goal was to ensure that the European Union comes out of this crisis in solidarity.
The leaders of the EU’s two largest economies met via video conference between Berlin and Paris to try and find a common position on a recovery fund, which would come out the European Union’s 2021 to 2027 budget.
The “ambitious, targeted and temporary” recovery fund would finance the relaunch of the EU economy. The eurozone economy is predicted to shrink by 7.7% overall this year.
Since the coronavirus crisis hit, France has sided with Spain and Italy to demand that the EU issue joint debt, in the form of “corona bonds,” to raise money for EU member states whose economies have been devastated by the coronavirus pandemic.
Germany, Austria, and the Netherlands opposed debt mutualisation for the bloc, although Germany has said it is ready to commit to much more aid for EU countries.
Spain, France, and Italy have been the worst-hit EU countries in terms of both coronavirus cases and deaths from COVID-19.
EU spokesperson Arianna Podesta said today that Berlin’s state aid to support its economy accounts for more than half the €1.95tn in state aid approved by regulators for the whole EU.
The coronavirus pandemic pushed Europe’s largest economy to abandon its long-held ‘black zero’ rule against taking on new debt, and it has mobilised billions in grants, state-backed loans for companies, and short-term work programs.