"No country should be left behind" - Commissioners propose EUR 1,500 bn aid programme
The European Union’s Internal Market Commissioner Thierry Breton and European Economics Commissioner Paolo Gentiloni have published a joint article calling for solidarity and a pan-European response to the coronavirus crisis.
Regarding the financial issues at the centre of challenges facing the EU, the Commissioners laid out three principles:
- No country should be left behind;
- No economy should be an isolated victim of the pandemic;
- All EU countries must have fair access, under comparable conditions, to the financing needed to fund their plans.
The overall financing needs of the 27 EU countries must be commensurate with what is at stake. The German plan for additional debt issuance of EUR 356 bn voted by the Bundestag (in addition to the EUR 600 bn rescue plan that Germany had already put in place, including EUR 400 bn of guarantees) represents 10% of its GDP. If we were to apply this 10% to the European Union, the financing requirements could then be in the range of EUR 1,500 bn to EUR 1,600 bn, to be injected directly into the economy, the Commissioners said.
The amount includes the EUR 750 bn asset purchase programme announced by the European Central Bank (ECB),under which it will purchase debt issued by the member states and the private sector.
All this could complement the EUR 100 bn mechanism that the Commission proposed last Thursday to help workers maintain their incomes (SURE).
Further supplementary aid could come from existing or new sources, including cheap loans from the financial crisis-era European Stability Mechanism (ESM), cash from the European Investment Bank, and an EU-wide unemployment reinsurance scheme, skirting the issue of joint debt.
However, given the amounts involved, a fourth pillar of European funding will be necessary, Breton and Gentiloni argued Monday, adding that EU member states must now show a common spirit of decision and innovation. This could for example take the form of a purpose-built European fund that could issue long-term bonds, and tax resources could also be allocated to such a non-conventional financing instrument, the Commissioners said, adding that it could have a governance system that would avoid any moral hazard, particularly with regard to the objectives of the financing, which could be strictly limited to joint investments for economic recovery linked to the current crisis.
On Sunday, Portfolio published an exclusive opinion piece by European Commission President Ursula von der Leyen, who talked about European solidarity and called for a major European Marshall plan.
Cover photo: Dursun Aydemir/Anadolu Agency via Getty Images