European Commission president Ursula Von der Leyen shed some light on her upcoming COVID-19 recovery plan in the European Parliament on Wednesday (13 May) but did not unveil the size of the updated EU budget proposal that will underpin the plan.
“We need to support those that need it the most,” von der Leyen told MEPs before unveiling details of her blueprint that will be presented on Wednesday (20 May).
“We have to push for investment and reform – and we have to strengthen our economies by focusing on our common priorities, like the European Green Deal, digitalisation and resilience,” the Commission president told the EU assembly.
As previously announced, the recovery plan will be based on the EU’s seven-year budget and will be topped up by a recovery instrument “funded through a larger headroom”. Concretely, this means the Commission will propose to borrow a fixed maximum amount of money from the markets making use of guarantees provided by member states.
However, von der Leyen did not unveil the size of the recovery instrument or the updated EU budget, while the European Parliament is asking for a package worth €2 trillion.
A recovery package based on “three pillars”
Von der Leyen said “the bulk of the money” will go to a “Recovery and Resilience tool” to fund public investment and reforms. Those funds will be included in the framework of the European Semester of economic policy coordination, with the aim of supporting Europe in its transition to “a climate-neutral, digitalised and resilient” economy.
While the fund will be available for all EU member states, it will focus on the areas most affected by the lockdown measures imposed during the coronavirus outbreak. For that, the Commission plans to “top-up” the cohesion envelope within the current EU budget and allocate the money to countries based on “the severity of the economic and social impacts of the crisis.”
The second pillar of the recovery instrument will seek to mobilise private investment to kick-start the economy, with a particular focus on strategic sectors.
Von der Leyen announced she will strengthen InvestEU, the investment instrument that succeeded the so-called Juncker Plan, and will create a new “Strategic Investment Facility” to “help invest in key-value chains crucial for our future resilience and strategic autonomy, such as the pharmaceutical sector”.
The Commission president also confirmed her intention to create a solvency instrument to help match “the recapitalisation” of healthy companies which are “at risk as a result of the lockdown.”
In the third pillar, von der Leyen intends to reinforce instruments that proved their worth during the COVID-19 crisis – from RescUE (natural disasters) to Horizon Europe (research and innovation) – and create a dedicated health programme.
The Commission also intends to reinforce cooperation with foreign countries in the EU’s neighbourhood, including development cooperation and pre-accession assistance for the Balkans.
Von der Leyen sees the EU budget and the recovery instrument as complements of the “three safety nets” that were previously agreed by EU leaders – namely, a new credit line for companies provided by the European Investment Bank; new corona loans for countries provided by the EU’s bailout fund (the European Stability Mechanism); and the SURE tool tabled by the Commission to support temporary unemployment schemes in EU countries.
The Commission president said the recovery tool “is short-term” and will be concentrated “on the first years of recovery.” It will include grants and the possibility to frontload part of the money in 2020 “using proven financing models based on national guarantees.”
Particularly hard-hit countries such as Italy or Spain have warned about the need for a quick response to cope with the economic fallout of the coronavirus outbreak. The link between the EU budget, which was already stuck at the Council before the crisis erupted, and the recovery fund, will make the political discussion harder.
Nikolina Brnjac, Croatian State Secretary for Cooperation with the European Parliament, said the Council will have to study the Commission proposal in detail before being able to establish a position.
The Parliament itself partially welcomed von der Leyen’s proposal but questioned the level of ambition and asked for further details and, in particular, for numbers. The Commission is expected to unveil its plan next Wednesday (20 May).
The Commission president admitted that the price of rebuilding the EU’s economy is rising debt. “We must boldly use this opportunity to build a modern, clean and healthy economy, which secures the livelihoods of the next generation,” von der Leyen told Parliament, saying the recovery plan “is built on necessity but is designed for the future.”