FRANKFURT – Germany’s agreement to share debt with other EU countries to finance an economic recovery plan is being greeted as a political breakththrough and an overdue sign of unity in the face of the worst downturn the bloc has ever seen.
Chancellor Angela Merkel broke with her country’s longstanding opposition to shared borrowing with other EU member countries. The proposal made with French President Emmanuel Macron is limited in scale and duration, which could help her sell it to skeptics back home.
The 500 billion euros ($550 billion) fund would make outright grants to help countries through the recession, going beyond an earlier rescue package based on loans that would have to be paid back someday. By endorsing common borrowing and direct cash help, the Merkel-Macron deal is being viewed by some as a step toward stronger EU financial links, as the 27-country union faces challenges not just from the virus crisis, but from populist forces in member countries Hungary and Poland.
France, whose president had pushed hard for the fund proposal announced Monday, exulted. “It’s a historic breakthrough,” said Finance Minister Bruno Le Maire on Tuesday. “We will be able to support the economic recovery in the countries most hit by the virus.”
“The second consequence is political: France and Germany affirm loud and clear their determination to see solidarity among European Union members placed at the heart of the European construction,” he said, calling it “a historical step for the whole European Union.”
Macron and Merkel suggested that the fund would send money starting in 2021 to the areas hardest hit by the virus outbreak and target sectors that are priorities for EU economic policy such as digitalization and fighting climate change.
The fund would be a one-off part of the EU’s budget and take advantage of EU institutions’ ability to borrow at extremely low interest rates for long periods. It adds to a 540 billion-euro package agreed among finance ministers from the 19 EU countries that use the euro. That included loans from the eurozone bailout fund that would have to be repaid.
Since the proposal is only for a limited one-time fund during a crisis, it would represent incremental change. But some were seeing it as potentially the harbinger of more EU central spending.