The European Union has finalized the creation of fund that will be able to raise at least 1 trillion euros or $1.1 trillion which will be spent in supporting and helping EU’s regional economies that have been significantly damaged by the novel coronavirus pandemic, to rebuild themselves.
“This fund shall be of a sufficient magnitude, targeted towards the sectors and geographical parts of Europe most affected, and be dedicated to dealing with this unprecedented crisis,” leaders of the 27 EU countries said in a statement after they met via video conference on Thursday.
Officials at the European Commission were directed by the heads of the EU governments to develop plans and proposals on an urgent basis that will include the relation of the recovery fund to the budget of the EU for 2021-2027, added the EU leaders.
The plan of the EU is to increase its budget to about 1.2 per cent of GDP from about 1 per cent of GDP and then make use of the additional money to serve as a guarantee for borrowing from the financial markets at low rates of interest.
“This has to be looked at thoroughly … but we are not talking about billion[s], we are talking about trillion[s],” said European Commission President Ursula von der Leyen when asked by reporters how much could be raised.
An immediate aid package aimed to funding rescue measures worth at least €500 billion ($538 billion) was also signed off by the EU leaders. That [package had been agreed to by the finance minister of EU countries earlier this month and it includes up to €100 billion ($110 billion) for the purpose of wage subsidies targeted to stop mass layoffs in addition to granting loans to businesses and credit for EU governments worth hundreds of billions of euros. \
“There are reasons for some optimism that, even if we don’t get as joined-up a response as we’d like overall, the European fiscal response to this crisis may yet end up being sizeable,” commented Societe Generale strategist Kit Juckes in a research note on Friday.
The latest efforts of EU aimed at prevent the deep recession in the bloc turning into a 1930s-style depression can be termed as huge, when combined with the already declared stimulus efforts worth several hundred billion euros that the national governments have announced .
According to the prediction of the International Monetary Fund, there will be a contraction of 7 per cent in the GDP prevent the region’s deep recession turning into a 1930s-style depression of EU for the current year and according to indications from the latest data, economic activity in March and April may slumped to between 20 and 30 per cent.
There was consensus among EU states on the need for a “strong, coordinated response [worth] around 5 to 10 [percentage] points of GDP,” said French President Emmanuel Macron speaking after the video conference.
“The common market today benefits certain states or regions that are the most productive in Europe because they produce goods that they can sell in other regions. If we abandon these regions, if we abandon part of Europe, all of Europe will fall,” Macron said.
(Adapted from CNN.com)