REVIEW - EU Commission's New Economic Recovery Plan Attempts To Merge Free Money, Repayable Loans

BRUSSELS (UrduPoint News / Sputnik - 27th May, 2020) On the backdrop of the worst ever economic downturn in Europe and internal conflict over how to organize the bloc's support to member-states affected by the coronavirus, European Commission President Ursula von der Leyen has tried to chase two birds at once, risking to end up catching none.

Germany and France have proposed setting up a 500 billion euro fund ($549) for subsidies to affected countries. While the heads of the Commission and Council have supported the plan, several countries � namely Austria, Denmark, the Netherlands and Sweden, often referred to as the "frugal four" � have rejected it, proposing instead that support be issued in form of repayable loans, cheap but not free.

On Wednesday, von der Leyen put forward an alternative plan, dubbed Next Generation EU, to raise the fund's capacity to 750 million euros, of which 500 million will be issued in grants and the remaining 250 billion in loans.

It will come on top of the bloc's revamped budget for the next seven years, amounting to 1.1 trillion euros, and the three safety nets of total 540 billion Euros in loans, agreed by the Parliament and Council. This effectively brings the EU's overall recovery effort to 2.4 trillion euros. At least, it is so planned.

WHO IS GOING TO PAY FOR CHEAP LOANS?

The coronavirus pandemic has pushed the EU into its deepest-ever recession, and von der Leyen's proposal, if passed, will become EU's biggest ever stimulus package. The question is, at whose cost.

Speaking to the Parliament at a plenary session on Wednesday, von der Leyen briefly mentioned that the EU could increase Europe-wide taxes on carbon emissions and imports of climate-unfriendly products, such as plastic, as well as introduce a new digital tax, likely targeting big tech sharks like Apple and Google.

Figures do not match, however. Even if to double or triple these taxes, it would not have a significant impact on repaying the huge debt that is going to fall on the European citizens' back.

"We either all go it alone; leaving countries, regions and people behind, and accepting a Union of haves and have-nots, or we walk that road together," von der Leyen said in her Churchillian address to the Parliament. "For me, the choice is simple. I want us to take a new bold step together. Europe is in a unique position to be able to invest in a collective recovery and a common future."

The virus has killed more than 173,000 people in Europe. The economy has been paralyzed in an unprecedented manner. After a two-month halt, some businesses are reopening, but very slowly, into the world where tight controls and restricted movements have become the new reality.

Next Generation EU is a plan that will entail a huge increase in the debts to be incurred by the next generation.

It has been asked for, even demanded, by countries affected by COVID-19 the most � France, Italy and Spain. These are, coincidentally, also the countries with some of the heaviest debts. Countries that have proven incapable of rebuilding their economies alone.

Under von der Leyen's plan, Italy will get over 80 billion euros in grants and Spain will get over 70 billion euros, several percentage points of their GDP each. As for loans, they will be issued with low-interest rates, but still need to be paid back eventually.

Internal aid in the EU, whether in structural funds or others, is majorly financed by Germany, at the level of about 50 percent. This makes Berlin's consent to give away free money to European neighbors even more significant. It is a total U-turn for Germany, driven, perhaps, by Chancellor Angela Merkel's ambition to remain in the history of politics as a true European.

It came as no surprise that the Next Generation EU initiative met all sorts of different opinions among the parliament forces, the same way as among individual states.

Christian Democrats, Socialists and Greens have generally supported the plan.

Left wants a more radical action, with "greener" premises and a stronger grip on taxing climate polluters and the GAFAM group of big tech companies, including Google, Amazon, Facebook, Apple, and microsoft.

The right groups are primarily concerned about the repayment of coronavirus loans, which they fear is going to become the burden of future generations. The far-right appears to be strongly opposed to the mutualization of debt and even more so to decisions on this matter being taken by the EU leadership behind the closed door.

"Merkel said she would not accept coronabonds, and now she is ready to give away 500 billion euros of taxpayers' money without any proper legal base. This does not seem to bother anybody here. It is totally wrong and hypocritical to invoke solidarity for it. It is a huge price that the citizens will have to pay," European Parliament lawmaker Jorg Meuthen from the far-right Alternative for Germany party said.

The same concern is raised within the ranks of Liberals.

Romanian MEP Dacian Ciolos has expressed about "creating debt for the next generation" and added that "Europe should not be a cash machine, and money should only be given to countries applying the rule of law, and certainly not to politicians who do not play by the rules," in an apparent reference to Poland or Hungary, currently considered pariahs in Brussels.

Whatever von der Leyen's ambitious plan, it will have to be agreed upon by all 27 member states to enter effect, and that is currently far from happening.