London Daily

Focus on the big picture.
Saturday, May 31, 2025

EU leaders agree on a massive, €750bn covid-19 recovery deal

EU leaders agree on a massive, €750bn covid-19 recovery deal

E.U. Adopts Groundbreaking Stimulus to Fight Coronavirus Recession. For the first time, the 27 countries will borrow and spend vast sums collectively. The $857 billion package includes unprecedented steps to help less wealthy countries, including selling collective debt and giving much of the money as grants, not loans.
The European Council, composed of the leaders of the EU’s 27 member states, agreed on a €750bn ($858bn) package to help countries’ economies recover from covid-19, part of a €1.8trn EU budget for the next seven years. The hard-fought deal shows that the bloc’s members have the sense of solidarity needed to respond collectively to disasters, despite internal political splits and grumbling from some of the rich members that foot most of its bills.

The covid-19 recovery package began as a proposal by Germany’s chancellor, Angela Merkel, and France’s president, Emmanuel Macron. It responded to the threat that the coronavirus could exacerbate the EU’s economic divisions: countries with severe epidemics, or heavy debt loads constraining government spending (such as Italy), faced much worse recessions than those with light epidemics and little debt (such as Germany).

The European Commission, the EU’s executive arm, had originally envisioned €500bn in grants and €250bn in loans. Most significant, the package was to be financed with bonds issued by the commission—the first time EU countries would issue such an enormous amount of collective debt.

The proposal for grants was bitterly opposed by a group of wealthy, mostly northern net-contributor states (nicknamed the “frugals”), led by the Netherlands and joined by Austria, Denmark, Finland and Sweden.

Mark Rutte, the Dutch prime minister, insisted that countries receiving grants carry out economic reforms, and that each individual country be empowered to veto every other country’s plan to spend the aid. As the summit stretched into a third and then a fourth day, the countries most eager for aid—Italy, Spain and Portugal—reproached the “frugals” for failing to compromise.

Another dispute centered on Hungary, where the increasingly autocratic government of Viktor Orban faces EU disciplinary proceedings over the rule of law, and where EU investigators have found extensive corruption. The commission (backed by France, the Netherlands and others) wanted measures to cut off aid if countries failed to respect the rule of law. For Hungary and Poland, which also faces rule-of-law proceedings, this was a red line.

In the end, these seemingly principled disputes were resolved through old-fashioned horse-trading. Mr Rutte and the frugals saw the amount of grants cut to €390bn, while loans were raised to €360bn. The rebates they get to lower their net contributions to the EU budget were increased, along with the amount they get to keep from customs revenue (most of which goes to the EU).

To placate their demands to hold down the overall EU budget, there were cuts to scientific research, industrial investment, rural development and other programmes. Mr Orban and Charles Michel, the European Council president, settled on language putting off mechanisms for rule-of-law sanctions to another day.

The overall result fell short of what some had hoped for. But it was greeted as a triumph in Paris and Berlin, and elsewhere by believers in a more powerful and more federal EU. The programme is equivalent to 4.7% of the EU’s GDP, a macroeconomically significant amount that comes on top of large stimulus spending by national governments. Stockmarkets were buoyed by the news. And it means the EU will engage in large-scale joint borrowing for the first time, giving the bloc significant fiscal resources to fight a recession collectively.

The resistance of Mr Rutte and the frugals was based on the fear that once Europe has agreed to use collective debt once, it will probably do so again. For advocates of a stronger EU, that is not a fear but a hope.
Newsletter

Related Articles

0:00
0:00
Close
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Trump Accuses China of Violating Trade Agreement
Gerry Adams Wins Libel Case Against BBC
Russia Accuses Serbia of Supplying Arms to Ukraine
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
Chinese Woman Dies After Being Forced to Visit Bank Despite Critical Illness
President Trump Grants Full Pardons to Reality TV Stars Todd and Julie Chrisley
Texas Enacts App Store Accountability Act Mandating Age Verification
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Vatican Calls for Sustainable Tourism in 2025 Message
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Trump Threatens 25% Tariff on iPhones Amid Dispute with Apple CEO
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
Liverpool Car Ramming Incident Leaves Multiple Injured
Australia Faces Immigration Debate Following Labor Party Victory
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
Macron Dismisses Viral Video of Wife's Gesture as Playful Banter
Cleveland Clinic Study Questions Effectiveness of Recent Flu Vaccine
Netanyahu Accuses Starmer of Siding with Hamas
Junior Doctors Threaten Strike Over 4% Pay Offer
Labour MPs Urge Chancellor to Tax Wealthy Over Cutting Welfare
Publication of UK Child Poverty Strategy Delayed Until Autumn
France Detains UK Fishing Vessel Amid Post-Brexit Tensions
Calls Grow to Resume Syrian Asylum Claims in UK
Nigel Farage Pledges to Reinstate Winter Fuel Payments
Boris and Carrie Johnson Welcome Daughter Poppy
×