EU $2 Trillion Recovery Deal.
                     EU $2 Trillion Recovery Deal
Introduction
• Europe's leaders have decided to establish a €750 billion ($858 billion) recovery 
fund to restore EU economies devastated by the coronavirus crisis after nearly five 
days of heated discussions.
Source: CNBC.com 
Original Proposal
• The initial plan by the European Commission was to allocate €500 billion ($573 billion) via 
grants, while €250 billion ($286 billion) should have been provided as loans. Yet over the 
summit, the number of grants had been fiercely contested. 
• The so-called "Frugal Four" countries — the Netherlands, Denmark, Austria and Sweden — 
were worried that financing the spending of other governments would burden their countries 
with debt.
Source: CNN
Differences
• Profound differences on how to divide the amount between grants and loans, how 
to oversee its investment and how to link it to the democratic values of the EU 
prolonged the talks into one of the longest EU summits in history. 
Source: South China Morning Post 
Longest EU Summit
• Since Friday morning the Heads of State have been engaged in negotiations to 
negotiate the new fund and the next budget for the EU. 
• Deep disagreements on how to split the amount between grants and loans, how to 
manage its expenditure and how to relate it to the democratic principles of the EU, 
however, prolonged the talks into one of the longest EU summits in history.
Source: The Indian Express
End of Debt
• Ultimately, they agreed to distribute €390 billion, out of the total €750 billion fund, 
in the form of grants — a significant decrease from an initial proposal made by 
France and Germany in May for €500 billion. 
• The EU has decided that the issuance of net debt would end in 2026, and will 
repay all existing debt by 2058.
Source: Pixabay
Acceptance of the Deal
• While member states will also need to create policies detailing how the new funds 
will be spent. 
• These so-called reform and recovery plans will need to be approved by their 
European counterparts, by qualified majority, rather than by unanimity, as the 
Netherlands had at one point insisted. 
Source: Bloomberg
Future Prediction
• Besides the recovery fund, the EU said its next budget, which would finance 
projects between 2021 and 2027, would amount to 1,074 trillion euros. The two 
together are taking future projects to 1.824 trillion euros.
Source: The Hill
Taxation
• The deal notes that a non-recycled plastic waste levy will be imposed as of Jan. 1, 
2021, and that there will be a carbon border adjustment system and a digital 
obligation in effect by Jan. 1, 2023. 
• In terms of digital taxation, the latter reflects almost a two-year gap from what an 
earlier plan proposed. 
Source: News Break
Gravity of the Deal
• Brussels' new agreement sets a precedent for EU-level joint debt borrowing, which many 
nations, including Germany, have long resisted. Yet in the aftermath of the Covid-19 crisis, the 
oppositional posture had softened. 
• The EU is sending out a clear signal of internal unity with the biggest initiative of cross-border 
cooperation ever. Near-term, the confidence effect can matter even more than the money 
itself
Source: The Wall Street Journal 
Conclusion
• As is the case in the United States , the European Union is often criticized for not having a 
common fiscal policy. Across some countries, recent spikes of anti-EU sentiment have ignited 
fears about a possible break-up of the union. 
• The EU and the euro zone are not on the road to fiscal union. Yet, when it counts, they are 
taking a big step towards better fiscal cooperation. The contract creates precedent. During a 
recession the EU faces debt.
Source: CGTN.com