EU leaders to defer decision on recovery package on Thursday

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European Union leaders meeting are on Thursday expected to defer a final decision on how to finance the bloc’s economic recovery in the aftermath of the coronavirus pandemic, diplomats and officials said according to a Reuters report.
EU csucs koltsegvetes Charles Michel Emmanuel Macron Antonio Costa

The GDP of the EU27 is expected to decrease by an average 10% due to the coronavirus pandemic,

the European Commision told national leaders’ envoys on Monday in a preliminary meeting, adding that it planned to finance the recovery fund via increased headroom in the bloc’s joint budget for 2021-27. The EC is seeking a temporary increase for 2021-22 of guarantees by member states for the budget’s resources, giving it leeway to raise more cash against that, said sources who participated in the discussion or were briefed on it.

A point of contention in Monday’s discussion was reportedly whether extra money raised would come as grants, which would not need to be repaid by member states, or loans that would have to be redeemed.

In related news, German Chancellor Angela Merkel signalled readiness on Monday to finance economic recovery from the coronavirus pandemic in Europe through a bigger European Union budget and the issuance of joint debt via the European Commission. Merkel was speaking in reaction to Italian Prime Minister Giuseppe Conte's Sunday interview in the Sueddeutsche Zeitung, in which Conte reiterated demands for controversial pooled debt instruments known as "coronabonds" to help out the European economy.

The size of the recovery fund is also unclear, according to the sources. Spain has called for a fund worth EUR 1.5 trillion, around three times the figure estimated by the head of the euro zone’s bailout fund.

Thursday’s video summit is therefore more likely to just task the Commission to work out the recovery fund proposal in more detail, the sources told Reuters.

The Commission plans to present an updated draft of the 2021-27 budget on 29 April and it would have to be approved by all the 27 member states to take effect from next year.

The stakes are high for Hungary ahead of the summit, as the ongoing Article 7 procedure and the potential sanctions regarding EU funding may also influence funds it receives for recovery.

Cover photo: Getty Images

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