EU members agree to historic €750bn coronavirus recovery plan

French President Emmanuel Macron and European Council President Charles Michel at the European Union summit in Brussels that secured an historic 750-billion-euro deal to help the bloc recover from the coronavirus pandemic. STEPHANIE LECOCQ / POOL / AFP

Leaders of European Union member states announced Tuesday morning they had agreed upon an unprecedented burden-sharing deal worth 750 billion euros to help countries hit hard by the coronavirus pandemic rebuild their economies.

“An historic day for Europe!” French President Emmanuel Macron said in a series of tweets after the marathon four-day, four-night summit of European leaders on Tuesday. 

Un plan de relance massif est adopté : un emprunt commun pour répondre à la crise de manière solidaire et investir dans notre avenir. Nous ne l’avions jamais fait ! La France a porté sans relâche cette ambition. https://t.co/x3ltuf69Ca

— Emmanuel Macron (@EmmanuelMacron) July 21, 2020

“A massive recovery plan has been adopted: a common loan to respond to the crisis in solidarity and to invest in our future. We’ve never done this before! France never gave up in pursuing this ambition.”  

The proposal, opposed by the Netherlands, Austria and other northern members wary of footing the bill for their southern neighbours, made for fierce negotiations that saw France threaten to walk out and Hungary threaten to veto.

A number of conditions were added to secure the deal, which represents the largest-ever joint borrowing by the 27 members of the bloc. 

“These were of course difficult negotiations in very difficult times for all Europeans,” said summit moderator Charles Michel, president of the European Council, the EU body gathering heads of member states. 

We did it! We have reached a deal on the recovery package and the European budget for 2021-2027.

This is a strong deal. And most importantly, the right deal for Europe right now. #EUCO pic.twitter.com/c6fQ5ppwpf

— Charles Michel (@eucopresident) July 21, 2020

Victory for Macron

The deal is a victory for Macron, who has struggled to convince other leaders to strengthen the EU at a time of Brexit and of euroscepticism in many countries. 

“This is a historic change for Europe,” Macron told reporters in a joint press conference with German Chancellor Angela Merkel, who said the deal showed the block was able to face up to “the greatest crisis in the history of the European Union”.

The deal expanded on a proposal announced by the two leaders in May that marked a significant shift from Germany, whose long opposition to sharing debt burdens made it the face of intransigence during the Greek debt crisis of the early 2010s. 

The deal will send billions of euros to heavily indebted Spain, Italy and others of the countries hit hardest by the coronavirus pandemic. 

The Netherlands led a group of small northern nation in opposing the package, arguing it was unnecessary and fearing a “transfer union” of wealth generated in northern countries flowing south.

“This is a one off, there is a clear necessity for this given the excessive situation,” Dutch Prime Minister Mark Rutte said after the deal was announced. 

Payouts come with conditions

The package complements the unprecedented monetary stimulust of the European Central Bank, which has reassured financial markets despite an economic forecast predicting the EU economy will retract by 10 percent this year.

The deal will send 390 billion euros in the form of grants, lower than the original 500 billion proposed by France and Germany, with another 360 billion in loans repayable by the recipient state. 

Stimulus payments will be closely controlled and must be devoted to policies seen as compatible with European priorities, including meeting environmental and economic norms.

The European Commission will be in charged with distributing the funds and member states can turn down spending plans if a majority decide to intervene. 

Reluctant nations were also enticed by heavy rebates on their contributions to the bloc, furthing a practice offered to Britain over several decades of its EU membership. 

Protests from Hungary and Poland led negotiators to water down conditions that payouts be tied to rule of law, in reference to Brussels’ charges of breaches of freedom of speech and independence of judiciary in Budapest and Warsaw. 

The package nearly doubles the EU’s long-term budget, bringing spending to 1.8 trillion euros through to 2027. 

It still requires technical negotiations among member states and ratification in the European Parliament. 

(with newswires)