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EU unveils plan to borrow 750 billion euros to aid economic recovery

The European Commission has unveiled plans for a 750 billion euro ($826.5 billion) recovery fund as the region faces the worst economic crisis since the 1930s.

It will borrow these funds and then disburse them via the European budget — the EU’s common basket of cash that supports programs such as Erasmus. They will be repaid between 2028 and 2058.

The 750 billion euros includes 500 billion euros in grants and 250 billion euros in loans to member states. Out of the 500 billion euros in loans, 310 billion will be invested in the green and digital transitions.

Germany and France opened the door to issuing mutual EU debt last week, suggesting that the Commission, the EU’s executive arm, should raise 500 billion euros on the public markets to be distributed as grants.

The initiative was described as a “breakthrough” and a “historic” step as Germany had always opposed the idea of jointly-issued debt, even during previous crises.

However, there are four European countries that still broadly oppose issuing grants as a way to mitigate the economic fallout from the Covid-19 crisis, preferring instead loans that will be repaid. Austria, the Netherlands, Sweden and Denmark also want strong economic reform commitments in return for any financial help.

By including a component of grants and loans, the Commission is seeking to bridge these differences among the 27 EU countries.

A Dutch official, who didn’t want to be named due to the sensitivity of the negotiations, told CNBC Wednesday that “the positions are far apart and this is a unanimity file, so negotiations will take time. It’s difficult to imagine this proposal will be the end-state of those negotiations.”

EU unveils plan to borrow 750 billion euros to aid economic recovery, CNBC, May 27

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