EU Commission proposing 750 bn-euro virus recovery plan

European Union flags are reflected in a window at the headquarters of the European Central Bank in Frankfurt, Germany, April 21, 2016. (Reuters Photo)

The European Union is unveiling a massive coronavirus recovery plan worth hundreds of billions of euros to help countries rebuild their ailing economies, but the bloc remains deeply divided over what conditions should be attached to the funds.

The move Wednesday comes as the 27-nation trading bloc is set to enter its deepest-ever recession as the impact from the pandemic ravages economies. Virtually every country has broken the 's deficit limit as they've spent to keep health care systems, businesses and jobs alive.

Earlier this month, the leaders of Germany and France – historically, the two main drivers of EU integration – agreed on a one-time 500 billion-euro ($543 billion) fund, a proposal that would add further cash to an arsenal of financial measures the bloc is deploying to cope with the economic fallout.

That plan would involve the EU borrowing money in financial markets to help sectors and countries that are particularly affected by the pandemic. The European Commission's blueprint is likely to resemble the Franco-German plan in many ways while attaching the fund to the EU's next long-term budget.

The big question will be how much money will take the form of grants and how much would be loans.

Austria, Denmark, the Netherlands and Sweden – a group of countries dubbed the "Frugal Four" for their budgetary rectitude – are reluctant to see money given away without any strings attached, and their opposition to grants could hold up the project.

"Will it be grants or loans? And if it will be grants, who are going to pay the grants? Loans, I think, is a more interesting way forward to discuss, but we also have to discuss under what conditions shall we give these loans," Swedish Finance Minister Magdalena Andersson said Tuesday.

Whatever its content, the commission's plan is likely to spark heated debate and the EU does not have time for the wrangling to drag on. The new budget period begins on Jan. 1, and countries across the bloc are desperate for funds now. All 27 member countries must agree for the fund to take effect.

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