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French President Emmanuel Macron and German Chancellor Angela Merkel have proposed borrowing up to €500 billion on the international markets to hand out in grants and loans to member states. Their blueprint would see the European Commission take on new, joint debts, with EU countries assuming liability, to fund the aid payments. The money will be used to support the EU’s most pandemic-stricken industries and regions.
But a study by the Centre for European Economic Research has found the bloc’s poorest countries could become some of the largest contributors to the fund.
Poland could become the largest net contributor in relation to its own economic output with a contribution of €10.4 billion, under one prediction.
This is because Warsaw is forecast to experience a milder recession than the EU’s biggest economies.
Because the likes of France, Spain, Greece and Ireland are expected to be hit harder by the coronavirus fallout, they would benefit more from the recovery fund.
Only Germany, the EU’s largest economy, would pay more than Poland under a model based on GDP slumps this year.
Berlin would be expected to make net payments of €23.45 billion into the fund.
Whereas Italy, the EU’s third-largest economy, would benefit from a €25.8 billion handout, Spain is set for €13.73 billion and France, the bloc’s second-largest economy, would profit €10.67 billion from the scheme.
The so-called “Frugal Four” – Denmark, Austria, Sweden and the Netherlands – who have publicly opposed the Franco-German plan would also become net contributors under the calculations.
Romania and the Czech Republic would also be saddled with expectations to contribute more than a million euros each to the recovery fund.
Professor-Doctor Friedrich Heinemann, the author of the study, said: “The recovery fund will ultimately not be able to solve the dramatic financial problems in Italy and Greece.
“It is economically correct that money is now flowing from Eastern Europe to Southern Europe because the recession in the south is particularly deep.
“Politically, however, this will cause considerable resistance.
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“If the recovery fund is to make a contribution to recovery, then the money must flow very quickly and be used to precisely to stimulate the economy. However, the long-term benefits of the fund are not apparent.”
With opposition for the Franco-German plan is growing, the Netherlands, Austria, Denmark and Sweden on Saturday published a counterproposal.
The four fiscally conservative, northern capitals want recipients of recovery funding to display a “strong commitment to reforms and the fiscal framework”.
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Austrian Chancellor has previously said the funds should be distributed in the form of loans.
But Madrid has warned it will would reject a loan-based recovery fund because it would saddle Spain and Italy with the most debt.
A European Commission spokesman said: “We have seen the paper and will consider it in the ongoing work on our proposal as we did with all other ideas and proposals floated these past weeks.”
Ursula von der Leyen, the Commission President, is due to publish a 2,000-page proposal this week to use the EU budget to kickstart the economic recovery from the coronavirus downturn.
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