BRUSSELS (Reuters) – European Union leaders agreed on Tuesday on a package of measures to boost their economies after the coronavirus pandemic, and agreed to borrow and spend hundreds of billions of euros in the coming years and pay them with the new taxes.
European Council President Charles Michel, Dutch Prime Minister Mark Rutte, French President Emmanuel Macron, and Spanish Prime Minister Pedro Sánchez speak during the EU’s first face-to-face summit since the outbreak of coronavirus disease (COVID-19), in Brussels, Belgium, on July 20. , 2020. John Thys / Pool via REUTERS
1. The key to the deal is a new element in EU policymaking: the European Commission will take massive loans on the market and then lend much of the cash, rather than lend it, to countries that need economic stimulus the most.
EU leaders agreed that the Commission would borrow 750 billion euros at low cost using its triple-A rating. Of that, it would spend 390 billion in grants and 360 billion in cheap loans.
2. Grants force the bloc to generate cash to pay off loans in 2058. Leaders agreed that:
– Germany, Sweden and the Netherlands would lose their current discount on the amount of VAT they transfer to the EU.
– EU countries will impose a tax on non-recycled plastic and pass the profits on to the EU coffers.
– From 2023 there would be a tax on goods imported into the EU from countries with lower carbon emission standards than the block.
– A tax on financial transactions is another option, since it is to get some money by extending the emissions trading system to the maritime and aviation sectors.
These new taxes will be expressly allocated to the repayment of the 750 billion loans, but will become part of the reality of the EU for the next 38 years.
3. Grants will be disbursed to countries that present plans that strengthen their growth potential, job creation, and the economic and social resilience of their economies. The plans also have to make economies greener and more digital and be in line with the Commission’s annual recommendations.
The disbursement will require the approval of a qualified majority of EU governments and will be linked to meeting milestones and targets. If any EU government believes such targets have not been met, it can ask EU leaders to debate it within three months.
The money will also be linked to rule of law enforcement, an issue for Poland and Hungary that are under EU probes about their rule of law practice. But there will be a lot of political leeway: if the Commission decides that there are “widespread deficiencies in the good governance of the authorities of the Member States as regards respect for the rule of law”, it can propose measures that would have to be backed by a qualified majority of governments.
4. To ensure their support for the recovery plan, net contributors to the EU budget, such as the Netherlands, Sweden, Austria, Denmark and Germany, will receive much deeper reimbursements than before in what they have to contribute each year to coffers of the EU depending on the size of its economies.
Reports by Jan Strupczewski, Robin Emmott edition
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