After weeks of debate between EU leaders over which financial mechanisms should be used to rescue their economies, France and Germany presented a joint plan to create a €500 billion recovery fund, to help the EU's countries worst affected by coronavirus.

In a joint video conference, French President Emmanuel Macron and German Chancellor Angela Merkel, proposed to authorise the European Commission to borrow money on behalf of the whole EU, and spend it in addition to the 2021-2027 EU budget that is close to €1 trillion for this period.

The money from that fund, allocating within the next Multiannual Financial Framework (MFF), would be given as grants, not loans as some countries requested before.

Macron and Merkel stressed that they wanted “to help ensure the unanimity of the 27 member states in next week's vote by offering a vision of the necessity of this response, the mechanism for it, and its scale”.

“Our goal is clear: Europe will face this crisis together”

“This is major step forward, a real change in philosophy […] It's what the Euro zone needs to remain united”, Macron said.

According to Merkel, the proposal is “a one-off effort, short-term response to the crisis. Due to the unusual nature of the crisis we are choosing an unusual path”.

“As our societies and economies slowly find their way out of the severe restrictions of recent times, we continue to face extraordinary uncertainties. Our goal, however, is clear: Europe will face this crisis together”, both underlined in a statement.

European reactions

The European Commission, which will present its own proposal for a Recovery Fund linked to the EU's next long-term budget on May 27, said it welcomed the initiative from Paris and Berlin.

Italian Prime Minister Guiseppe Conte described the proposal on Twitter as “an important first step in the right direction”, and Spain's President Pedro Sanchez “welcome the proposal as a positive step in the right direction”.

However, their Austrian counterpart Sebastian Kurz announced on Twitter that he has spoken with the Danish, Dutch and Swedish leaders on the proposal and “their position remains unchanged. We are ready to help most affected countries with loans”.

Timo Plutschinski: “Loans will generate dependence”

The Director of the World Evangelical Alliance’s (WEA) Business Coalition, Timo Plutschinski, in an interview with Evangelical Focus, had  warned about the problems with the funds giving through loans.

“How to overcome these issues during this pandemic time? That’s the question. Probably with funds from the IMF and the World Bank, but they do give loans and not grants, so it will generate dependence. The weaker countries will be more dependent on international organisations, like these two”, he said.

“Banks and governments have to be proactive and stimulate the market”

According to Plutschinski, “banks and governments do not have to keep money back and wait for better times but to be proactive and stimulate the market”.

Jorge Saguar, a consultant and business analyst and member of the Group of Evangelicals in Economics and Business (Tres-e) had pointed out that “now the intervention of central banks is necessary, providing liquidity to states and companies so that they can meet current expenses”.