Europe preparing a trillion-euro fund to rebuild Economy

European leaders had agreed to set up a vast recovery fund to help cushion the economic blow of the COVID-19 pandemic. The fund may be worth more than a trillion euros. The leaders have agreed to anchor this fund in this seven-year EU budget from the start of 2021. That is the money that will help governments to have their economies recover. So, The question is where the money will come from? Or the member states will have to repay it.

The Netherlands has been reluctant to take on the debt collection, but they appear to join and to work on a plan for the recovery fund. The European commission now tasked with writing up a proposal is already preparing for the fight between countries over whether the fund should issue repayable loans or some grants.

Europe economic power

Crucially, the European economic power host, Germany, says it is prepared to pay more into the EU part for the fund. Italy also supported it, and Spain who were insisting on taking on collective debt and the Leaders were given two weeks to continue negotiations. 

Still, the European Union (EU) leaders attempt to perform a show of unity and solidarity.

French President Mr. Emmanuel Macron said that

“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,” 

Eu leaders agreed a 540 billion euros aid package to provide support for economies struggling as a result of the Covid-19 crisis.

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The Bloc leaders approve a 540 billion euros aid package tabled by Eurogroup. The fund should be operational by June 1. Council President Charles Michel told where the money would be going. 

He said “This fund shall be of sufficient magnitude, targeted towards the sectors and geographical parts of Europe most affected, and be dedicated to dealing with this unprecedented crisis,”

The President of the European Commission, Mrs. Ursula von der Leyen, said about how much funds could be raised? She said, “This has to be looked at thoroughly. But we are not talking about billions; we are talking about trillions.” 

The bloc is expected to spend even more money, but there are still disagreements about spending that on a longer-term recovery plan. 

The European Union (EU) is setting an intention to increase its amount of money from about 1.2% of GDP to 2% of GDP. After that, the additional money could be used as an assurance to take low rates from the financial markets.

The Prime Minister of Italy, Mr. Giuseppe Conte, who had blamed the European Union response to the COVID-19 outbreak because they lack immediate European Solidarity, expressed his satisfaction via video conference on Thursday.

He said, “It’s important because this is a necessary and urgent tool. Italy must be the first in line to ask for this,” 

Earlier, he also said that the pandemic and the resulting economic and social consequences pose “a big challenge to the existence of Europe.”

French President said that the European Union was confronting a moment of truth.

Earlier, French President Emmanuel Macron said that the EU was confronting a moment of truth,” which is to settle whether the European Union (EU) is a government project or just a business project. He warned of the collapse of the EU as a political project unless it supports stricken economies such as Italy and helps them recover from the coronavirus pandemic.

He said, “I believe the EU is a political project. If it’s a political project, the human factor is the priority, and there are notions of solidarity that come into play…the economy follows on from that, and let’s not forget that economics is a moral science.”

And what’s more, is that this may lead to the rise of populism and nationalism. 

Which may lead to the repeat of History

 “If we can’t do this today, I tell you the populists will win… today, tomorrow, the day after, in Italy, in Spain, perhaps in France and elsewhere,” he said.

Overall this is the initial agreement. On April 9 talks: The European Central Bank (ECB) said that 1.5 trillion euros are needed to fight against this COVID-19 pandemic. But, the talks agreed upon just 500 billion emergency loan finance. When one of the European Union (EU) countries get into some problems or difficulties.

The European Union (EU) turn away and expect that the issue will go away was becoming a popular opinion. Italy also fears that if they borrow all the money they need to prevent an economic depression, Then they risk themselves to fall into a sovereign debt crisis later. Mainly they were discussing whether there should be collective bonds that the EU countries were taking on together. That wasn’t accepted by the countries of the north like the Netherlands, Sweden, Australia, and Denmark.

So now what they work on is a proposal that came from the Spanish Government, which is for the recovery fund. Spain has proposed that there will be around 1.5 trillion euros eventually. The difference is how the money should be handed out either as loans or as grants because this is the money that will help European governments to have their economies recovered. It is also the finance for the EU for the next seven years (2021-2027)

The Collapse of the Euro Currency

On January 31, 2020, the country United Kingdom (UK) has left the European Union (EU). If Italy does leave the European Union, it will bring down the currency as it is the third-largest economy in the group. Spain would also be forced to follow suit after suffering a massive resultant shock. That will collapse not only the European Union but also the Eurozone.

Hence, the situation is getting complicated, so the question is, will the European Union (EU) could survive the Covid-19 pandemic? I’d love to hear all about this in the comments!



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