BERLIN — Austrian Chancellor Sebastian Kurz said that he and the other leaders of the EU’s so-called frugal four group were encouraged by some aspects of the European Commission’s proposal for a coronavirus crisis recovery fund, but cautioned it represents just a “starting point” for negotiations.
“What we find positive — not just myself, but the Netherlands, Sweden and Denmark — is that there is a time limit and that the fund will be a one-time emergency measure and not the first step toward a debt union,” Kurz, who has emerged as the unofficial spokesman of the frugal faction, said in a telephone interview with POLITICO on Wednesday.
“Considering that there are many in Europe who want such a debt union, it’s important to us that this be clarified in writing once and for all,” he said, referring to concerns among the frugal group that the fund could morph into a permanent fixture, opening the door to mutualization of members’ debt under the banner of the EU.
“When it comes to the ratio of credits and grants, that’s an area where we really think there needs to be more negotiation,” Kurz added.
Under the proposal put forth by the Commission, the EU would create a €750 billion fund — called Next Generation EU — by selling bonds. About €500 billion would be disbursed as grants to those member countries most in need as a result of the crisis, while the remaining €250 billion would be available as credits, which countries would be obliged to repay.
In effect, the Commission proposal fuses a €500 billion Franco-German plan unveiled earlier this month with a model based on loans put forth by the frugal faction, a group so named due to its members’ purported commitment to budget discipline.
Kurz said that while he wasn’t surprised to see the Commission effectively adopt the Franco-German grant proposal, given those countries are the EU’s biggest members, the coming negotiations will have to be more inclusive.
“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.”
At first glance, the Commission plan appears to be an attempt to placate the frugal four by tacking the credit component to the Franco-German plan. Whether the €250 billion in credits would ever be tapped however, is questionable, in part because the eurozone recently established an emergency loan facility under the aegis of its bailout fund, the European Stability Mechanism (ESM).
The ESM was conceived to help cash-strapped countries combat debt crises like the one that bankrupted Greece. It’s now been retooled to make it easier for countries struggling with the coronavirus crisis to borrow money — up to the equivalent of 2 percent of their national income, or €240 billion in total.
Why countries such as Italy, which are already drowning in debt, would need access to an additional credit facility is far from clear and prompted a degree of consternation in some quarters.
Kurz said the frugal four had yet to fully evaluate the Commission’s proposal in detail and settle on a common negotiating position, but would do so in the coming days.
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