The European Commission is set to unveil on Wednesday a plan aimed at enabling an economic recover to the EU zone from the economic impact of the coronavirus. Part of the package includes grants, loans and guarantees which exceed 1 trillion euros.
The economic package is aimed at helping sectors among countries within the EU bloc which have been significantly affected by the COVID-19 pandemic and help them improve the pace of recovery and protect EU’s 27-nation single market bloc, where individual countries have divergent economic wealth and growth.
The economic package will be very helpful to countries, including, Spain, Portugal, France, Greece and Italy which have a high pile of debt and are very reliant on tourism as a source of revenue.
The ingenuity in the plan enables the European Commission to borrow cheaply on the market against the security of the EU budget and then give some of the borrowed money, rather than lend it on, to those who need it most.
Critics, including Denmark, Sweden, the Netherlands, and Austria, are worried that since grants, financed through joint borrowing, will have to be repaid, those who have opted for such grants will have to either pay higher national contributions to the EU’s budget in the future or impose new taxes assigned to the EU.
The European Commission is set to propose new taxes, a follow up of its 2018 proposal wherein it had asked EU governments to contribute revenues from a tax on plastic as well as those stemming from a CO2 emissions trading scheme and national corporate taxes.
The European Commission has also proposed to phase out the various tax rebates countries currently enjoy on their national contributions to the EU budget, and cutting by 50% the amount of customs duties governments keep and as well as retain a larger share of the Value Added Tax paid to the EU.
By increasing its revenue streams, the European Commission is hoping to transition to an economy that is climate neutral by 2050 and increasingly adapt itself to the digital age.
Both objectives are EU priorities.