The EU ended its meeting on economic recovery with a historic stimulus deal on Monday. In the long meeting between the 27 members of the Union in Brussels, which lasted for over 90 hours, they resolved to raise €750 billion ($857 billion) that will be used to rebuild the economy shattered by the coronavirus pandemic.
The talk has lasted that long due to existing issues needing to be resolved by the members, which borders on how to divide the amount between grants and loans, how to oversee its investment and how to link it with the EU’s democratic values.
Disagreement between members had stalled a recovery plan for the European Union back in April, when €540 billion was proposed as part of bailout for EU countries worst hit by the health crisis.
This time, they agreed to distribute €390 billion ($445 billion) as grants to the hardest hit member countries while the rest will be given as loans. As part of the agreement, €1.1 trillion ($1.2 trillion) will be provided for the 2021-2027 EU budget, a historic sum described as “classic” by the EU leadership.
“It is an ambitious and comprehensive package combining the classical budget with an extraordinary recovery effort destined to tackle the effects of an unprecedented crisis in the best interest of the EU,” the statement from EU leaders said.
Aside from the economic impact of the agreement, the deal signals a stronger European Union where members could overlook their differences and pursue a common goal.
The European Council president, Charles Michel told the press on Tuesday that the deal signifies a “strong” and “united” Europe.
“We did it! Europe is strong. Europe is united. This is a strong deal, and most importantly, this is the right deal for Europe right now,” he said, adding that it was the first time members of the European Union were “jointly enforcing our economies against the crisis.”
Considering the past records of the EU meetings, where discussions were clouded in emotions of disagreement, the members have leaped with the strength of compromise to scale the anti-progress hurdles which were usually based on getting the “frugal four,” Sweden, Denmark, Austria, Netherlands and Finland to agree with others.
In the past, the group had put the grant for hardly hit members at €375 billion, whereas some members such as Spain and Italy didn’t want to go below €400 billion while the “frugal four” didn’t want to go above the proposed €375 billion. The “frugal four” were cajoled to compromise through a promise of rebates on their EU contributions. Spain, Italy and others who were previously keen on €400 billion agreed to the newly suggested €390 billion as a compromise.
The frugal four had opposed the suggested €500 billion grant because the repayment plan means every member country will have to contribute, and they were not ready to pay for a loan they were not the beneficiaries.
However, the new deal means that the European Union will have to look for new ways to fund the package. The Commission said it’s proposing fresh ways to raise funds which includes introducing ‘digital levy’ for tech companies, and new tax on financial transactions. It added that it’s considering updating an emissions trading program, which limits the number of greenhouse gases companies are permitted to emit without paying a fine. It said the restrictions imposed on some companies could be extended to maritime and aviation industries.
But the deal also means the European Union will become a big debtor in the financial market for the first time, with a repayment plan stretched to 2058. However, it doesn’t seem to be a problem as all members expressed satisfaction with the deal, though there are still other matters that need to be addressed, including winning the trust of the European parliament.
European Commission president Ursula Von der Leyen tweeted at the end of the meeting that the Union has taken a historic step “we all can be proud of.”
“Today we’ve taken a historic step, we all can be proud of. But other important steps remain. First and most important: to gain the support of the European parliament. Nobody should take our European Union for granted,” he said.
While there is still a thwarted relationship between the EU member nations, the objective has been achieved based on a collective willingness to compromise.
“We showed collective responsibility and solidarity and we show also our belief in our common future,” Michel said.