Follow Us

Follow us on Twitter  Follow us on LinkedIn

05 May 2020

Top MEP: Coronavirus recovery fund must include grants

An over-reliance on loans risks splitting North and South, says Italian MEP Irene Tinagli.

The EU’s post-coronavirus recovery fund must give countries cash in hand to overturn the recession, the chairwoman of the European Parliament’s Committee on Economic and Monetary Affairs said in an interview with POLITICO’s Brussels Playbook.

Irene Tinagli, a member of Italy’s center-left Democratic Party, made the comments ahead of the European Commission’s planned proposal for a recovery fund that is linked to the EU’s next seven-year budget. The Commission is eyeing a fund that can generate at least €1 trillion of investments, which would then go to countries to help kickstart their economies. But how much of that will be allocated through loans, and how much handed out as grants, is up for debate.

While some of the countries affected most by the crisis — including Tinagli’s home country Italy — are already highly indebted and are reluctant to take on a heavier financial burden, governments including in Austria, Finland, Germany, the Netherlands and Sweden oppose the idea of giving away free money.

More debt won’t help, Tinagli said.

“We can’t only allocate money exclusively through loans because we know that in the end, loans will still make the debt increase,” said the 46-year-old Italian, whose country last year recorded a debt pile of around 135 percent of economic output — second only to Greece. “We will need grants.”

More debt would “put pressure on a bunch of other variables we’ve seen in the past and we don’t want to see that again,” added Tinagli.

Commission President Ursula von der Leyen told leaders in late April that the Brussels executive would issue EU bonds on capital markets to finance the fund. The Commission would need government guarantees to do so and would raise the ceiling on how much countries can contribute to the EU budget to boost its firepower.

That firepower will only have a real impact with grants, Tinagli argued, otherwise it risks diverging countries’ economic recoveries and jeopardizing the bloc’s single market as a result.

“We have to be very careful not to make mistakes this time,” Tinagli said, referring to the EU’s reaction to the financial crisis in 2009 that left the south in economic hardship as the north continued to prosper. Putting the focus on avoiding divergence will help the Commission figure out the fund’s size and the right balance between grants and loans, she said....



< Next Previous >
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information

Add new comment