EU on the brink: Frugal four leaders tear up €750billion coronavirus bailout fund

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Sweden, Austria, Denmark and the Netherlands all called for a responsible spending plan to fund the recovery of the EU’s most pandemic-stricken regions and industries. Their opposition leaves a quick fire compromise unlikely when on Friday EU27 leaders hold crunch video talks on the €750 recovery fund. It even leaves chances of an agreement doubtful when the bloc’s prime ministers and presidents hope to convene for face-to-face negotiations next month for the first time since the coronavirus outbreak.

Under the blueprint set to be discussed, European Commission President Ursula von der Leyen proposed a joint debt mechanism that will raise €500 billion on international markets before being distributed in the form of grants.

Another €250 billion will be dished out to member states in loans to help pay for economic impacts of their crippling lockdowns.

The cost of the debt would be shared across the bloc and be paid back with vast hikes in national contributions to the EU’s long-term budget.

Writing in the Financial Times, Swedish prime minister Stefan Lofven said: The outlook now is bad – the OECD forecasts gross domestic product losses this year of seven, eight, 10 percent and more for individual EU countries, instead of expected growth.

“This situation is shared by all in the EU. Therefore, all four of us give our support to building a joint road to recovery.

“But in doing that, important principles ought not to be thrown overboard. How could it suddenly be responsible to spend €500 billion of borrowed money and send the bill into the future?”

He said that it would be taxpayers forced to shoulder the burden for recoveries in other European countries.

With the cost of the rebuild not expected to be paid back until 2058, future generations will be left forking out for the Commission’s plans for generations to come.

Mr Lofven added: “The emergency recovery fund should be open until the end of 2022. It needs to be of a significant size, but not bigger than could usefully be absorbed by member states during the present emergency.

“The crisis measure must not be mixed up with other challenges and priorities of the EU. These are addressed in our long-term budget from 2021 to 2027. Agreeing on that is also a matter of urgency, if things are to be up and running in time.”

In a letter to the Dutch parliament, the country’s government said grants should be scrapped in favour of low-cost loans.

“There is no obvious reason to provide grants instead of loans from the Recovery and Resilience Facility,” wrote finance minister Wopke Hoekstra and foreign minister Stef Blok.

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They also called for structural reforms and austerity measures as the price for any country using the recovery fund.

“In the government’s opinion, more attention could also be paid to the way in which member states implement the structural reforms necessary to strengthen their economic foundations, for example by reducing levels of debt, reforming pension systems and improving their administrative capacity,” they added.

In an attempt to alleviate fears of misspending, Italian prime minister Giuseppe Conte vowed to use the fund wisely.

He said: “It’s an opportunity for us to design a better Italy, to work on a serious, comprehensive investment plan that will make the country more modern, greener, and more socially inclusive.”

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Rome is set to receive around €172 billion from the fund, the largest share.

Mr Conte took a hardline approach to the coronavirus, virtually bringing his country’s economy to an immediate standstill after imposing a lockdown in March.

He said: “I often say it’s not a handout to benefit the current government, it’s an investment we must make in Italy and in Europe for our children and grandchildren.”

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