Wednesday, 15 April 2020

Next budget must be European answer to coronavirus crisis, EU chiefs say

The European Union needs to put its multi-year budget at the center of the bloc's economic recovery plan, two of the EU's top officials said on Wednesday, likely triggering more battles among member states about how to pay for it.

Already facing a funding gap left by Britain's exit from the European Union, richer states such as Germany resisted stepping up even before the coronavirus crisis, more recently delaying decisions for a temporary economic recovery fund.

European Commission President Ursula von der Leyen, a former German defense minister, said that the larger seven-year budget should be "a European answer" to a crisis that will sharply shrink economic output this year in EU countries.

"The next European budget has to be the European answer to the corona crisis," von der Leyen told a news conference with EU Council President Charles Michel, who will chair a videoconference summit of the bloc's leaders' on April 23.

"To be able to do that, it has to be different, completely different from normal European budgets," she added.

Michel also called for a "Marshall Plan", alluding to Europe's reconstruction after World War Two, and said EU leaders must consider reworking plans for the 2021-27 EU budget during their video conference.

"We're not talking about a billion (euros), we're talking about a trillion, looking at the investment initiative that has to be done," von der Leyen said.

Negotiations on the EU's next long-term common budget, which is worth about 150 billion euros a year, were launched two years ago along familiar battle lines, with France seeking to protect farm subsidies and the Netherlands wanting a smaller budget than when Britain was a member.

But the coronavirus' destructive impact has shifted the debate away from whether the EU should spend more on common defence and technology to helping euro zone governments such as Spain and Italy facing the economic shock of long lockdowns.


Von der Leyen also appeared to suggest a bigger EU budget would remove the need for jointly-issued debt by euro zone governments, which the Netherlands and Germany oppose.

The budget has proven to be the "best instrument for cohesion and convergence", von der Leyen said, using EU jargon for levelling up differences between richer and poorer states.

Euro zone finance ministers agreed a half-a-trillion euro plan to support coronavirus-hit economies last week. However, to the disappointment of several states led by Italy, the deal did not include using joint debt to finance the economic recovery.

EU leaders are expected to discuss next week whether to develop a financial vehicle to borrow funds on capital markets and then use them to attract private money for investment.

Von der Leyen said that the EU executive should run any such recovery fund, a contentious idea given that it would contain EU states' money.

Von der Leyen said one way to handle the common budget differently would be to make much of the money available quickly to inject as much funding as possible in the first part of the seven-year scheme.

Separately, the EU will organise an online donor conference on May 4 to raise funds for the search for a vaccine for the novel coronavirus. The Commission said it did not have a target amount but that 8 billion euros was needed.

The Brussels-based EU executive also called on member states to coordinate their gradual easing of lockdowns to prevent any new spikes of the coronavirus epidemic.

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