EU proposes 750 billion-euro coronavirus recovery fund

European Commissioner for Economy Paolo Gentiloni talks to journalists during a news conference at the EU headquarters in Brussels, Wednesday, May 20, 2020. (John Thys/Pool Photo via AP)

BRUSSELS (AP) — The European Union’s executive arm is proposing a 750 billion-euro ($825 billion) recovery fund to help the bloc’s economy through the painful recession triggered by the coronavirus pandemic, commissioner Paolo Gentiloni said Wednesday.

Gentiloni, who is in charge of economic affairs at the commission, wrote in a tweet that the move is “a European turning point to face an unprecedented crisis.”

However, the 27-nation EU remains deeply divided over what conditions should be attached to the funds, and the commission proposal is likely to set off weeks of wrangling. Details of the plan are due to be unveiled later Wednesday.

The move comes as the world’s biggest trading bloc enters its deepest-ever recession, weighed down by the impact of the coronavirus. Virtually every country has broken the EU’s deficit limit as they’ve spent to keep health care systems, businesses and jobs alive.

While citizens across Europe are slowly returning to work and students move gradually offline and head back to classrooms, hardest-hit countries like Italy and Spain remain in desperate needs of funds and want to avoid any long-term wrangling.

Earlier this month, the leaders of Germany and France — historically, the two main drivers of EU integration — agreed on a one-time 500 billion-euro ($543 billion) fund, a proposal that would add further cash to an arsenal of financial measures the bloc is deploying to cope with the economic fallout.

That plan would involve the EU borrowing money in financial markets — an unprecedented move by the commission — to help sectors and countries that are particularly affected by the pandemic.

The blueprint is likely to resemble the Franco-German plan in many ways while attaching the fund to the EU’s next long-term budget. Most of the money is likely to take the form of grants, but some countries are insisting that conditions-based loans be provided instead.

Austria, Denmark, the Netherlands and Sweden — a group of countries dubbed the “Frugal Four” for their budgetary rectitude — are reluctant to see money given away without any strings attached, and their opposition to grants could hold up the project.

“Will it be grants or loans? And if it will be grants, who are going to pay the grants? Loans, I think is a more interesting way forward to discuss, but we also have to discuss under what conditions shall we give these loans,” Swedish Finance Minister Magdalena Andersson said Tuesday.

Whatever its content, the commission’s plan is likely to spark heated debate and the EU does not have time for the wrangling to drag on. The new budget period begins on Jan 1, and countries across the bloc are desperate for funds now. All 27 member countries must agree for the recovery fund to take effect.