Germany and France Proposed a 500 Billion Euro EU Economic Recovery Fund... but Differences Remain

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] German Chancellor Angela Merkel and French President Emmanuel Macron proposed on the 18th (local time) the establishment of a 500 billion euro (approximately 667.5 trillion KRW) economic recovery fund to prevent the economic damage to the Eurozone caused by the novel coronavirus infection (COVID-19). This was intended to resolve the deadlock in economic policy discussions among European Union (EU) member states, but the ongoing disagreements between northern and southern countries suggest that reaching a result will not be easy.

According to AFP and other sources, Chancellor Merkel and President Macron issued a joint statement on the day, stating that the fund would be used specifically for EU member states severely affected by COVID-19. Chancellor Merkel said, "The EU is facing the most severe crisis in its history, and this crisis demands an appropriate response." President Macron explained that the fund would be raised through joint borrowing by the EU's 27 member countries, calling it "a significant step forward."

This proposal by the two leaders came amid ongoing disagreements among member states over economic stimulus measures within the EU. In Europe, the European Central Bank (ECB) introduced a 750 billion euro 'Pandemic Emergency Purchase Programme (PEPP)' as a COVID-19 response measure, and discussions have continued regarding additional support measures such as joint bond issuance among member states.

In this process, countries heavily impacted by COVID-19 such as Italy and Spain have argued that the EU should provide subsidies, while Germany, the Netherlands, and others have taken the position that support should be provided through loans. This difference in stance has caused the discussions on additional support measures to reach a deadlock without producing results.

Germany and France stepped in to resolve this, but differences between the two sides remained unresolved on the day. Spanish Prime Minister Pedro Sanchez described it as a "positive step," but Austrian Chancellor Sebastian Kurz tweeted shortly after the announcement that he had discussed with the leaders of Denmark, the Netherlands, and Sweden and expressed readiness to help countries affected by COVID-19 through loans. This clearly revealed the ongoing disagreement between subsidies and loans.

EU Commission President Ursula von der Leyen welcomed the "constructive proposal" put forward by France and Germany, stating, "It acknowledges the scope and scale of the economic challenges facing Europe." The EU Commission plans to unveil its own plan for Eurozone economic recovery to member states on the 27th.

This content was produced with the assistance of AI translation services.