VIENNA (AFP) – Four European Union (EU) countries dubbing themselves the “frugal four” presented their own proposal yesterday for post-coronavirus economic recovery, restating their rejection of any jointly-issued debt instruments.
The group, comprising Austria, the Netherlands, Denmark and Sweden, wants emergency help for badly affected countries to take the form of one-off loans “on favourable terms” which must be agreed within two years, according to the proposal published by the office of Austrian Chancellor Sebastian Kurz.
In addition, the money lent must be “directed towards activities that contribute most to the recovery such as research and innovation, enhanced resilience in the health sector and ensuring a green transition”, the proposal said.
Earlier this week French President Emmanuel Macron and German Chancellor Angela Merkel proposed a EUR500 billion (USD546 billion) fund to mend an economy devastated by the pandemic.
The fact that Germany signed up to a plan involving jointly-issued debt was seen as a historic turning point for the EU given Berlin’s longstanding commitment to balanced public finances.
But the so-called “frugal four” continue to insist there must be no “mutualisation of debt” – a process they believe would let the less disciplined and weaker EU economies get an undue benefit of cheaper funding on the back of their stronger northern peers.
The proposal published yesterday said that support for economic recovery should be accompanied by “a strong commitment to reforms and the fiscal framework” – a key obligation for recipient states.
The four countries also say it will be necessary to “protect spending from fraud” by closely involving European prosecutors and anti-corruption officials.
The proposal rejects the prospect of any “significant increases” to the EU’s budget, as envisaged by the Macron-Merkel plan to fund the recovery programme.
Instead it said the EU budget should be “modernised” and that savings could be achieved “by reprioritising in areas that are less likely to contribute to the recovery”. In contrast, COVID-19-related expenditure could be frontloaded or temporarily topped up, the proposal said.
Given the gloomy economic forecasts for this year, “additional funds for the EU, regardless of how they are financed, will strain national budgets even further”, the four countries said.
Next week the European Commission, the EU’s executive arm, is set to present its own plan for how to stimulate economic recovery after the crisis.