The European Commission wants to issue bonds to raise the funds, taking a step closer to a shared budget potentially paid for through common taxes.
For decades, even when the 2008 financial crisis threatened to blow the bloc apart, the European Union’s wealthier nations resisted the notion of collective debt. But the coronavirus has so fundamentally damaged the bloc’s economy that it is now forcing European leaders to consider the sort of unified and sweeping response once thought unthinkable.
The European Commission, the bloc’s executive branch, on Wednesday proposed that it raise 750 billion euros, or $826 billion, on behalf of all members to finance their recovery from the economic collapse brought on by the virus, the worst crisis in the history of the European Union.
The plan, which still requires approval from the 27 national leaders and their parliaments, would be the first time that the bloc raised large amounts of common debt in capital markets, taking the E. U. one step closer to a shared budget, potentially paid for through common taxes.
For those reasons, the proposal had all the hallmarks of a historic moment for the E. U., vesting greater authority in Brussels in ways that more closely than ever resembled a central government.
“This is about all of us and it is way bigger than any one of us,” Ursula von der Leyen, the commission president, told European Parliament members in a speech in Brussels. “This is Europe’s moment.”
At another moment — one without a calamitous recession looming — the proposal would probably have been dead on arrival and antagonized the populists and nationalists who oppose the gathering power of Brussels. But the urgent need for a powerful response to the virus has muted much of the appeal of that message, at least for now.
There is little question that Europe’s recovery will be difficult and cost trillions, with some of its economies set to shrink by as much as 10 percent this year. The friction between China and the United States also poses a major challenge for a bloc that trades heavily with both.
Until now, the European Central Bank had been propping up the economy by sweeping up bonds by member states at low cost to ensure money keeps flowing in to finance stimulus efforts. But the economic crisis is so large that anything less than a bold response from European Union leaders risked inviting another kind of crisis — one of legitimacy.
With Britain gone, the calamity brought on by the virus forced Germany and France, the bloc’s two strongest countries that often find themselves at loggerheads, to step up in a rare display of joint leadership, paving the way for the commission’s proposal.
Even so, the plan is bound to be watered down in the weeks and months ahead. The proposal requires unanimous backing by member states, and a handful of the richer and less affected ones, such as the Netherlands and Denmark, consider joint borrowing and grant distribution to be unfair.
“We need to take everyone’s interests into account and there are very different interest groups: the southern countries, who fundamentally always want more; the East Europeans, who have an interest in preventing everything from flowing south; and, of course, those who have to pay for it all, the net payers,” Sebastian Kurz, the Austrian chancellor who opposes parts of the commission’s proposal, told Politico Wednesday.
