EU executive to propose trillion euro recovery grants and loans

The European Commission will present a pandemic recovery plan next week that will exceed 1 trillion euros in a mix of grants and loans, Executive Vice President Valdis Dombrovskis said on Tuesday.

Dombrovskis, speaking at a press conference after a meeting of EU finance ministers, welcomed a proposal put forward by France and Germany on Monday for a 500 billion euro economic recovery fund to disburse grants to worst-hit regions and sectors.

But he said the commission would be bolder.

“Our ambition is not to increase the financing capacity in the range of hundreds of billions, but rather by a figure exceeding a trillion euros,” he said.

“Of course, in this case, we are talking about both in loans and grants. That’s the level of ambition we are discussing the context of our recovery instrument proposal.”

The commission’s proposal on May 27, linking the Recovery Fund with the EU’s next long-term budget for 2021-2027, will be the basis for discussions of all EU governments in June.

Dombrovskis said the commission was examining if some of the money could be made available this year but noted this could be legally tricky.

Southern European government bond yields fell heavily on Tuesday in reaction to the Franco-German idea of large-scale grants as such a solution would help southern countries like Italy or Spain, hit hard by the epidemic, recover without being crushed under a mountain of debt.

The European Central Bank also welcomed the idea of large-scale grants, saying it would bring essential relief to the worst-hit nations and demonstrate solidarity.