Tuesday 19 May 2020 12:01 pm

German finance minister: €500bn Recovery fund will help Europe exit crisis

Germany’s finance minister has said the proposed €500bn (£450bn) European recovery fund will help EU member states “grow out of the crisis together”.

Olaf Scholz’s statement came after German Chancellor Angela Merkel and French Prime Minister Emannuel Macron yesterday jointly suggested a €500bn fund in what was seen as a potential breakthrough for the bloc.

Read more: Coronavirus sends Eurozone economy to worst quarter on record

Under Merkel and Macron’s radical plan, the European Commission would borrow the money by issuing bonds. The sums would dwarf the Commission’s previous debt issuance.

The money would then be distributed as grants – rather than loans – to the countries that need it most. It would then be paid back through the EU budget over a long time period. Merkel said Berlin would bare roughly 27 per cent of the cost, as it does for the regular EU budget.

Germany and France were previously at an impasse over the recovery plan. But Merkel and Macron’s showing of unity could be a breakthrough for the EU, which has been riven with disagreements over coronavirus.

Scholz today said: “It’s good for the necessary consensus in Europe that Germany and France are making a joint proposal on this issue.”

He added: “This new €500bn fund will make it possible for Europe to grow out of the crisis together and become stronger. 

“I think that’s a very good message not only for the economy and jobs but also for the future of the European Union.”

However, Merkel and Macron’s plan – announced at a joint video conference yesterday – is already facing some opposition.

Many traditionally fiscally conservative northern European states such as the Netherlands and Austria do not want money to be handed out as grants.

Austria’s chancellor Sebastian Kurz said Austria, the Netherlands, Denmark and Sweden would only accept a rescue fund that handed out loans.

It follows weeks of disagreements over whether a recovery fund should use “coronabonds”, jointly issued debt. Many southern European states such as Italy, Spain and Portugal have pushed for them. But Northern states such as the Netherlands have objected.

Read more: German economy shrinks at fastest pace since financial crisis

The Merkel-Macron proposal is radical and likely to please southern European nations that have long called for direct transfers to help the EU economy.

Macron said: “I believe this is a very deep transformation and that’s what the European Union and the single market needed to remain coherent. It’s what the Eurozone needs to remain united.”