• The Financial District


European Union (EU) chief Ursula von der Leyen has proposed on Wednesday a roughly one-trillion-euro post-virus recovery fund for Europe, but her pet project must have to win over skeptical member-states to become operational, according to a report by the Agence France Presse (AFP) on Wednesday, May 27, 2020.

Both France’s President Emmanuel Macron and German Chancellor Angela Merkel supported the move, with each of them vowing to raise 500 billion euro each from the financial markets, as recession bites into the 26-member political and trading bloc. The virus has killed at least 172,000 people in Europe and put its economy in a deep freeze, with businesses only slowly reopening and tight controls on borders that were once wide open for travel and trade.

Merkel dropped a bombshell last week by approving an idea that partly reverses Berlin's staunch opposition to joint borrowing by EU members. Merkel, who is in the final years of a long stint as German chancellor, also backs the EU helping virus-struck countries with grants rather than loans, another policy U-turn by Berlin.

However, the French-German plan faces a counter-proposal from the so-called Frugal Four: Northern EU member-states who have traditionally opposed giving more cash to Brussels or transferring it to the indebted south. They firmly oppose paying out aid in grants, preferring loans that come with stern conditions and outside oversight, and reduce risk to their own taxpayers. They also accuse southern Europeans of living beyond their means and piling on debt instead of choosing fiscal reform.

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