BRUSSELS (AP) - European Union leaders agreed Thursday to revamp the EU’s long-term budget and set up a massive recovery fund to tackle the impact of the coronavirus and help rebuild the 27-nation bloc’s ravaged economies, but deep differences remain over the best way to achieve those goals.
With more than 100,000 Europeans known to have died from the virus, according to the European Centre for Disease Prevention and Control, and business only slowly starting to open in some countries, the urgent need for funds in hard-hit countries like Italy and Spain has never been starker.
“This pandemic is putting our societies under serious strain. The well-being of each EU member state depends on the well-being of the whole of the EU. We are all in this together,” European Council President Charles Michel told reporters after chairing the leaders’ video-conference summit.
The uneven impact of the virus on countries with very different budgetary means has eroded trust, with Italy and Spain notably lacking confidence that relatively wealthier northern EU partners like Austria, the Netherlands or Germany - who have suffered less from the disease - are willing to take swift, sweeping measures backed by real economic firepower.
But the leaders did agree to task the European Commission with revamping the EU’s next seven-year budget - due to enter force on Jan. 1 but still the subject of much disagreement - and devise a massive recovery plan. While no figure was put on that plan, officials believe that 1-1.5 trillion euros ($1.1-1.6 trillion) would be needed.
“There is only one instrument that can deliver this magnitude of task behind the recovery and that is the European budget clearly linked to the recovery fund,” European Commission President Ursula von der Leyen said. “The budget is time tested. Everybody knows it. It is trusted by all member states.”
Northern European countries, like the Netherlands and Germany, generally remain reluctant to share too much debt out of fear of having to foot the bill for others, and debate raged Thursday over what form some of the funding should take, either grants or loans.
Von der Leyen said that the budget “investment should be front loaded in the first years and of course it is necessary to find the right balance between grants and loans.” When asked what amount of money might be found with some adjustments, she said: “we’re not talking about billion, we’re talking about trillion.”
Even before these new funds are agreed, the EU’s institutions and member countries combined have mobilized around 3.3 trillion euros ($3.6 trillion) for overburdened health services, suffering small businesses, embattled airlines or wage support for people unable to work.
Despite knowing that the revamp will cost her country more money, German Chancellor Angela Merkel endorsed the plan, saying “of course this means Germany must calculate with higher contributions for the next budget … but that’s right and good.” In normal times, the seven-year budget totals around 1% of EU gross national income, or just over 1 trillion euros.
French President Emmanuel Macron welcomed that the summit found “a consensus on a fast response and a strong one.”
“It is true that there are disagreements on the mechanism,” Macron said, and he insisted that the EU “will need real economic budgetary transfers, not simply only loans, but transfers to the worst affected regions and sectors.”
Even Italian Premier Giuseppe Conte, under huge domestic pressure, welcomed the progress.
‘’The recovery fund will finance all the countries hardest hit, Italy but not only. It is an urgent and necessary instrument,” Conte told Italians in a video address during dinner-hour newscasts. “It was unthinkable until now. It is a new instrument that makes us more solid, more coordinated and more efficient.”
During their talks, the leaders also endorsed a separate 540-billion-euro ($587 billion) rescue package drawn up by euro area finance ministers which would help pay lost wages, keep companies afloat and fund health care systems. They agreed that it should start operating from June 1.
Earlier, after addressing the leaders online, European Parliament President David Sassoli noted the economic damage the virus has done as Europe faces perhaps its deepest recession in a century.
“We are extremely concerned because we can see a downward spiral, and we are going to need every instrument available,” he said.
Referring to the massive U.S. aid package in 1948 that helped Europe rebuild after World War II, Sassoli said that “we’ve all called for this new Marshall Plan for Europe, but with a major difference of course. The funds will not be coming from abroad this time, but rather from European countries and economies.”
Even after this summit, much work remains to be done and little time to do it. The EU has been split over the budget for more than a year, with major contributors like Germany and the Netherlands reluctant to fill the estimated 75-billion-euro spending gap left by Britain’s departure from the EU.
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Colleen Barry in Milan, and David Rising and Frank Jordans in Berlin contributed to this report.
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