What we know of Commission’s pandemic economic recovery plan
A huge stimulus package to kick-start the EU economy once the pandemic ends is likely to feature a mix of loans and grants and be underpinned by private sector investments.
The package, which could be worth several trillion and is linked to the EU budget, is being drafted by the executive Commission for review by the bloc’s leaders by around mid-May.
How much?
Commission head Ursula von der Leyen said the plan would produce at least €1 trillion of support. She also said the scheme could last up to three years, suggesting the sum could be significantly higher. A Commission note had €2trn pencilled in brackets — a sign it might change.
Where would it come from?
Some would be cash, but most would be leveraged, along the lines of a flagship EU investment scheme used over the last five years.
The EU would use a small amount of its own money to finance the riskiest part of the inestement.
This would be the first tranche to bear any losses, leaving the safer, larger parts to private capital.
When would it begin?
The recovery plan would start when the next long-term EU budget starts, on January 1, 2021, providing there is agreement on the fiscal plan by then, which is not a given.
What about right now?
Some leaders asked the Commission for ideas on how some recovery money could be made available already now and the EU executive is considering “bridging solutions”.
How would governments receive the funds?
The package is to be a mix of loans and grants, whose proportions are still subject to negotiations between northern EU nations, which want mostly loans, and southern states insisting on grants to avoid an unsustainable debt build-up.
The Commission plans to borrow around €320bn on the market, according to an internal note, using its triple-A rating to do so cheaply.
It would then lend on around half of that to governments, producing €1.5trn-1.6trn of investment on the assumption it is leveraged 10 times, as suggested in the past by Budget Commissioner Johannes Hahn.
The loans would be long-term, but the Commission has yet to propose how many years.
The Commission wants to borrow the €320bn against increased government guarantees in the EU budget, which gets its money from customs duties on imports, a cut of national Vat and national contributions.
