The European Commission is ready with an outline of propsal for recovery fund to help EU member states whose economies have been hardest hit by #COVID19 . Not all details ironed out esp the emphasis on loans vs grants but .. /1
Commission President @vonderleyen has been talking to member states to get their crucial support. European Parliament must be on board and National parliaments in member states. Unanimity is needed. So bar is high .. /2
Commission says the fund needs to come as part of the still-to-be agreed and hotly contested new 7 year EU budget. Member States are partly short of cash (eg net payer Italy) or under political pressure not to spend much more (Netherlands) so Commission wants to use ‘headroom’ /3
Allowed over and above budget to get guarantees from member states in order to borrow more money from capital markets. Ie Commission has been looking for solution in an already-established mechanism, not requiring more immediate cash from EU countries but guarantees instead /4
Commission proposal is to divide up money raised: 80% to member states where economy most damaged by effects of #COVID19 10-15% goes to incentivising private sector to invest again in EU businesses and the rest ../5
Would be used Commission sources tell me, to re-inforce "stakeholders" so necessary during fight against pandemic - eg boosting European pharma to be able to produce basic medicines themselves. So EU not so reliant on countries outside bloc /6
On the 80% to member states, this is not purely those worst affected by health crisis eg Spain, Italy. It's worst affected economically ie also by the lockdown. Countries that already had weak economies before pandemic. This includes central and eastern European economies too /7
Commission would ask country requesting money from the recovery fund to present a national recovery plan - ie what they want money for. Then commission wld *work with them* to ensure money spent on *modernising* economy(eg digitalisation) or EU priorities eg clean technologies/8
Commission proposes no limits on which sectors can apply for the money in a country but conditionality would be that money be spent on modernising economy or on other EU priorities...(Countries may perceive this to be a “diktat” like loans during financial crisis) /9
Sweetener to encourage involvement of richer northern countries is that funds spent on the above in weaker EU economies would strengthen the single market as a whole... /10
The size of the fund still tbc. Ratio of loans vs grants (as contentious as the whole corona bonds debate) still tbc .. Huge debate still to be had but this, according to commission sources is how their proposal is shaping up /11
