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This is a qualitative leap in the organisation of European solidarity. The issuance of joint debt to combat this crisis would clearly indicate to markets and, more importantly, to Europeans, that the 27 countries are willing to act together

Josep Borrell – High Representative of the European Union

Thursday 4/06/2020

Image: Anthony Garner

On 9 May we celebrated the 70th anniversary of the founding moment of the European Union. The Europeans then decided to build a lasting peace based on cooperation and end years of terrible clashes. And now, the European Commission, in another decision that can also be described as historic, has proposed an economic relaunch plan, baptized as ‘New Generation EU’, to deal in solidarity with the coronavirus pandemic.

As said, the President of the European Commission Ursula von der Leyen, this small virus that is impossible to see has created a huge crisis but also a great opportunity to relaunch the European project and demonstrate its usefulness in dealing with problems that no country can solve alone.

An unprecedented economic crisis

The costs of the induced coma that we have had to apply to the economic system to prevent the spread of the disease are enormous and the countries most affected, including Spain, cannot take on the debt necessary to deal with them. That is why the recovery fund presented by the European Commission proposes to issue large-scale debt with EUR 750 billion, on behalf of the EU and supported by its Member States, to support very long-term budgetary transfers and appropriations to those most affected by the coronavirus crisis. Thus, this recovery fund would allow for a better mix of economic policies (fiscal and monetary policy) to deal with an unprecedented economic crisis. Never before would have been mobilized via indebtedness an amount that, today, would represent the 5.4% of the EU GDP, which, spread until the end of 2024, would an annual average of 1.3%.

The fund would allocate EUR 500 billion to Member States in the form of grants and EUR 250 billion in the form of loans to finance the economic recovery in proportion to the consequences of the crisis. This is a qualitative leap in the organisation of European solidarity, because until now the aid to deal to crises, such as the Euro, was done only by giving credit to countries, or by facilitating their access to the financial market, which increased their indebtedness.

The repayment of the EU debt and the payment of the corresponding interest will be made through the European budget in the very long term with the contributions of the Member States and through new EU own resources that will contribute to the fight against climate change and tax the benefits generated by the digital development of the economy.   

The solidarity, understood as support in mutual interest, cohesion and convergence in the exit from this crisis are three basic principles that inspire this proposal. Most of the resources go to a programme to support investments and reforms needed for economic recovery. These reforms will be linked to the Union’s priorities, in essence the ecological transition and digital transformation. A new initiative linked to the more urgent revival of the economy will provide support to workers, SMEs, and health systems. Another instrument will support investment in those viable companies before the crisis whose solvency is now threatened. This will help maintain the balance between States by providing resources to those who do not have sufficient financial capacity to provide direct aid to their companies. 

The need for a quick deal

But now we must hurry to approve this project and prevent it from being late for the hundreds of thousands of businesses and millions of European citizens who urgently need support. A rapid agreement of the European Council is necessary, which must be followed unanimously by the European Parliament and of the national parliaments. And it is logical that such a proposal will raise a very intense debate. It will not be easy to reach consensus among all the EU Member States but it is necessary to do so because the EU is playing its future on it.

For many reasons, this is another defining moment of the European project. The issuance of joint debt to combat this crisis would signal clearly to markets and, more importantly, to Europeans, that the 27 countries are ready to act together to deal with the biggest crisis in the EU history and to defend Europe as a political project.


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