Brussels mulls EUR1.5 trillion virus recovery fund

BERLIN (AFP) – European Commission Vice-President Valdis Dombrovskis yesterday said the European Union (EU) may need a EUR1.5 trillion (USD1.6 trillion) economic recovery fund following the coronavirus pandemic, but the financing of such joint spending remains murky.

“I could imagine that kind of level of financing,” Dombrovskis told German business daily Handelsblatt when asked about the EUR1.5 trillion figure, although “so far nothing is decided”.

Finance ministers from the 19 euro single currency nations last week agreed a package worth over 500 billion euros to cushion the immediate impact of the virus.

The toolbox includes loans from the financial-crisis-era European Stability Mechanism (ESM) but without the tough economic and fiscal reform conditions normally involved.

The ESM is flanked by guarantees for business lending from the European Investment Bank and a eurozone unemployment reinsurance scheme.

But after a war of words lasting several weeks, the finance chiefs could not agree on so-called “coronabonds”, joint debt instruments to finance recovery from the crisis urged by EU members such as badly hit Italy.

While the focus so far has been on footing the health bill for the virus pandemic and shielding businesses and workers from the financial fallout, politicians are already eyeing the day after the crisis.

EU leaders will hold a videoconference on April 23 “to lay the ground for a robust economic recovery”, European Council President Charles Michel said last week.

The idea of a coronavirus recovery fund has been brought up by many leading EU figures, with French Finance Minister Bruno Le Maire proposing EUR500 billion.

Meanwhile Internal Market Commissioner Thierry Breton on Sunday suggested 10 per cent of EU output would be needed, calling for one trillion euros on top of the EUR500 billion already agreed, the same amount urged by Italy’s Finance Minister Roberto Gualtieri.

Asked about joint bonds to finance recon-struction, Dombrovskis told Handelsblatt that “we expect the question to be on the table” at the April 23 heads of government meeting.