EU Unveils 1,020 Trillion Won COVID-19 Economic Stimulus Package... Largest Since Inception

▲Ursula von der Leyen, President of the European Commission (EU) [Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The European Union (EU) has unveiled its largest-ever economic stimulus package worth 750 billion euros (approximately 1,020 trillion won) since its inception. This is to support EU member states hit hard by the novel coronavirus disease (COVID-19).

On the 27th (local time), Ursula von der Leyen, President of the European Commission, announced a plan to raise a total fund of 750 billion euros at the EU budget announcement event held that day. Of this, 500 billion euros will be provided in the form of grants, and 250 billion euros in the form of loans.

The EU will leverage its high credit rating to raise 750 billion euros from financial markets to provide support. The plan is to repay these funds through new revenue sources such as the introduction of a plastic tax and digital tax in the future.

President von der Leyen said, "Funds will be provided to all member states," adding, "However, priority will be given to countries severely affected by COVID-19."

However, the funds come with the condition that they support low-carbon industries such as renewable energy. The EU has prioritized the use of COVID-19 funds for the 'Green Deal,' a policy aimed at addressing climate change. The EU aims to reduce carbon emissions to 'zero' by 2050.

President von der Leyen stated, "The EU's COVID-19 fund will turn the challenges we face, such as climate change and digitalization, into opportunities."

However, the announced stimulus package is only a proposal, and there is still a long way to go. First, the EU must overcome conflicts among member states. The debt-to-GDP ratios of Southern European countries like Italy and Spain, which have been severely affected by COVID-19, exceed 100%. In response, four Northern European countries?Netherlands, Denmark, Sweden, and Austria?are strongly insisting that the COVID-19 stimulus package should be in the form of repayable loans rather than grants.

The Eurozone (19 countries using the euro) debt is also a major hurdle. According to the semi-annual Financial Stability Report published by the European Central Bank (ECB) the day before, the fiscal deficit of Eurozone countries this year is expected to reach 8% of GDP. This far exceeds the deficit level during the 2008 global financial crisis. This is the result of Eurozone countries expanding fiscal policies to respond to the economic crisis caused by COVID-19.

On the morning of the same day, Christine Lagarde, President of the ECB, also warned, "The Eurozone economy will contract by 8-12% this year," adding, "This is twice as large as during the 2008 financial crisis."

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