News Spain, Italy win big as European Commission unveils $1.24 trillion virus recovery plan

Spain, Italy win big as European Commission unveils $1.24 trillion virus recovery plan

European Commission president Ursula Von Der Leyen and executive vice-president Frans Timmermans in Brussels on Wednesday. Photo: AAP
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The European Commission has unveiled a plan to borrow on the market and then disburse to EU countries 750 billion euros ($1.24 trillion) in grants and loans to help them recover from their coronavirus slump.

The news gave an immediate boost to the euro.

Much of the money is to go to Italy and Spain, the worst affected by the pandemic, which together would receive 313 billion euros in grants and loans.

The aim is also to protect the European Union’s single market of 450 million people from being splintered by divergent economic growth and wealth levels as the 27-nation bloc emerges from its deepest-ever recession, which is expected this year.

Of the €750 billion, two-thirds would be in grants financed by joint borrowing and one-third in loans.

The grants, although controversial, are needed because Italy, Spain, Greece, France and Portugal already have high debt and are heavily reliant on tourism that was brought to a halt by the pandemic.

They will find it more difficult than more frugal northern nations to restart their economies through borrowing.

The euro rose on the news to trade at 1.1022 against the US dollar, up from 1.0932.

The recovery fund package is in addition to the EU’s long-term budget for 2021-27, which the Commission will propose being set at 1.100 trillion euros, is virtually the same as the proposal discussed by leaders in February of 1.095 trillion.

“In total, this European Recovery Plan will put 1.85 trillion euros to help kick-start our economy and ensure Europe bounces forward,” the EU executive said in a document titled “Europe’s moment: Repair and Prepare for the Next Generation”.

The €500 billion in grants is in line with the wishes of the EU’s two biggest economies – France and Germany – though some nations would rather see the recovery package comprise only loans.