France and Germany on Monday proposed a 500 billion euro ($542 billion) recovery fund to finance the relaunch of the European Union’s economy, which is facing its biggest post-war crisis because of the coronavirus pandemic.
Financed by “borrowing from the market in the name of the EU,” the fund will flow to the “worst hit sectors and regions” in the 27-member bloc.
Countries benefiting from the financing would not have to repay the sum, said France’s President Emmanuel Macron.
“What is sure is that these 500 billion euros will not be repaid by the beneficiaries,” he said at a joint video news conference with Chancellor Angela Merkel.
“We are convinced that it is not only fair but also necessary to now make available the funds... that we will then gradually repay through several future European budgets,” said Merkel.
The borrowing would not amount to the so-called “coronabonds” sought by Italy and Spain because it would be made and repaid under the framework of EU budgets, rather than a direct mutualization of debt by member states.
But it nevertheless marks a major shift by Germany, which has until now rebuffed talk of common borrowing.
Germany, the Netherlands and other rich countries had long seen coronabonds as an attempt by the indebted south to unfairly take advantage of the north’s fiscal discipline.
But Merkel said the seriousness of the crisis meant that “solidarity” must be the order of the day.
“The aim is to ensure that Europe comes out of the crisis more cohesive and with more solidarity,” said Merkel, calling the proposal “courageous.”