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Home›Banking›“Frugal four” offers a “loan-for-loan” approach to the coronavirus recovery fund – POLITICO

“Frugal four” offers a “loan-for-loan” approach to the coronavirus recovery fund – POLITICO

By Raymond J. Nowicki
March 9, 2021
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The EU’s four so-called frugals – Austria, Denmark, the Netherlands and Sweden – are pushing for a ‘loan-for-loan’ approach for the bloc’s coronavirus recovery fund, document says position consulted by POLITICO.

France and Germany called on Monday for a 500 billion euros in stimulus funds which would give money to EU countries affected by the economic fallout from the coronavirus crisis. The proposal would allow the European Commission to borrow money from financial markets and then distribute the money in the form of grants.

In their non-paper, the frugal, who came out against the Franco-German plan, argue for a European Recovery Fund based on a “modernized EU budget” and ensuring that countries are “better prepared for the next crisis”.

The stimulus fund should be temporary and one-off, with a sunset clause after two years, and should not lead to debt pooling, according to the newspaper.

Such a fund would allow loans on favorable terms to member countries in need, while “limiting the risk for all member states and providing strong incentives”. Loan recipients are expected to carry out structural reforms to make their economies more resilient, the four countries said.

If the EU stimulus fund is tied to the bloc’s long-term budget, as the current proposals suggest, it will need the approval of all EU countries.

The European Commission is expected to unveil its proposal for a stimulus instrument and the overhaul of the EU budget for the period 2021-2027 on Wednesday. Commission officials have indicated that the proposed stimulus package will include a combination of loans and grants.

Lili Bayer and Matthew Karnitschnig contributed reporting.

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