Von der Leyen seeks to rally Europe behind “next generation” recovery plan
The European Commission president will make her pitch for a huge increase in spending power
Brussels will boldly go on Wednesday where no European Commission has gone before, with plans for an unprecedented borrowing spree aimed at funding the post-corona recovery.
The plans will be unveiled before the European Parliament this afternoon by commission president Ursula von der Leyen, who will advocate an EU-level effort to pump money into regions that have suffered the most from the health and economic emergency, tying the fund and the next EU budget together in a recovery package.
The package has been branded “Next Generation EU” by the commission, whose president appears to have a soft spot for sci-fi terminology, having previously dubbed the EU budget the “mother ship” of Europe’s economic rebound.
Ms von der Leyen has been clear that the EU’s long-term survival depends on how it responds to the crisis. The same fears stalk the corridors of power in Paris and Berlin. Italy, Spain and other countries on the frontline are watching closely for what Europe delivers in their moment of need.
But the package will have to be a political balancing act that also keeps on board “frugal” northerns wary of ramped-up EU spending, as well as central and eastern European countries that do not want to see large amounts of funds redirected at their expense.
Ms von der Leyen will get to her feet in the European Parliament at around 1.30pm Brussels time. According to people familiar with the plans, she will propose a recovery fund that more than matches Franco-German proposals from earlier this month for €500bn of EU borrowing on capital markets to finance grants. On top of this will be further borrowing to finance loans to member states — with discussions around €200bn.
As reported by the FT, the commission hopes it can convince member states to rally behind new taxes to raise revenue for the EU budget, helping it pay off its debts over the years to come.
One bright spot for Ms von der Leyen is that over the past couple of days both Denmark and Sweden have said that they are prepared to negotiate when it comes to the recovery fund — signalling a potential softening among the EU’s budget hawks. The two countries, along with the Netherlands and Austria, form the “frugal four” of EU budget hardliners. The group cosigned a paper over the weekend calling for the recovery fund to be limited to providing loans.
Sweden’s finance minister Magdalena Andersson told the FT on Tuesday that the “discussion has only just started”.
“It wasn’t like the French-German proposal was embraced by everyone in the European Union, and neither was our proposal embraced by everyone,” she said. “I think that’s a very common start of discussion in the European Union. And then at the end of the day, you would agree on something.”
But the recovery fund is only part of what is at stake. There is also the matter of the EU’s next seven-year, €1tn budget, which must be agreed for the recovery fund to become operational. EU leaders already spent a frustrating two days in February holed up in Brussels trying and failing to get a budget deal, not least because of the complications of filling the financial hole left behind by Brexit.
Speaking to reporters on Tuesday, Amélie de Montchalin, France’s Europe minister, said Paris was wary that the frugals could seek to rein in the EU budget as a quid pro quo for yielding on the recovery fund. The four countries have baulked at everything from the proposed abolition of their national budget rebates to attempts to grow the EU’s spending pot as a percentage of gross national income.
“We will not rob Peter to pay Paul,” Ms de Montchalin said, stressing that both parts of the package are vital. “What I don’t want is an arbitrage between the two tools: the recovery fund and the budget.”
“The real risk is that Europe fragments if we do not invest in our future,” she said. “The crisis has shown that previous arguments in favour of budget cuts do not hold . . . heavy cuts can no longer be defended.”
Star Trek’s signature board game is three-dimensional chess. It’s good training for negotiating about money in Brussels.