EU leaders have tasked the European Commission with designing the recovery plan for the deep economic crisis that the coronavirus COVID-19 will cause in Europe.

The mandate came after a four-hour teleconference on Thursday (23 April), in which recent tensions over how to finance the recovery, in particular between The Netherlands and Italy, were absent.

“Tensions, if they were there at all, are not there any longer,” Dutch prime minister Mark Rutte said after the videocall.

Part of the reason is that leaders did not go into the details of the economic response, and only held one round of interventions.

A consensus is starting to emerge on the overall framework to overcome what is likely to be the deepest recession that the bloc has suffered in its history.

Council seeks to narrow differences over COVID-19 recovery fund EU leaders meet on Thursday (23 April) for the fourth time in seven weeks to narrow their differences on how to set up a recovery fund to counter the economic fallout of the COVID-19 crisis.

During the videocall, European Central Bank President Christine Lagarde told the EU leaders that the eurozone’s GDP could fall by 15% under the most severe scenario, while the central scenario would be a 9% drop, sources confirmed to EURACTIV.com

Following the video-summit, European Council president, Charles Michel, said that the leaders had backed an “unprecedented investment effort” as part of the recovery plan.

However, differences continue to be significant on each of the main points of the plan, such as the size and the type of instruments to channel the funds (grants or loans), which further complicates the rapid adoption every government hopes to achieve.

The rescue fund proposal will come as part of the updated draft of the multi-year budget for the next period (2021-2027), expected to be put forward within the next couple of weeks.

Eurogroup agrees on €540 billion corona-package The Eurogroup finally agreed on a €500 billion package to support member states, companies and workers in the coronavirus crisis, after The Netherlands and Italy overcame they differences. Leaders will discuss in the coming days the recovery plan and the possibility of ‘coronabonds’.

It will come on top of the €540 billion in liquidity for countries, companies and workers already agreed by the Eurogroup, and rubber-stamped by the leaders on Thursday.

The President of the European Commission, Ursula von der Leyen, said after the teleconference that, to finance the recovery, she will propose increasing the ceiling of the EU’s own resources from 1.2% of the EU’s GNI to 2%. In this way, she hopes to raise money in the markets and generate additional investment in the magnitude of €1 trillion, although she did not specify the amount.

If Europe fails to deliver forceful response to cushion the economic damage, von der Leyen warned that the path out of the crisis would be uneven, given that some countries have less margin to support their ailing companies and citizens.

“This whole endeavour is about protecting the integrity of our single market and our Union, and If we succeed, then the investments would have been worth every cent we pay for them now,” she said.

A Commission’s internal document prepared ahead of the summit, and seen by EURACTIV, suggested that the stimulus needed should reach around €2 trillion, almost double the size of the current MFF.

The Commission’s issuance of debt is seen as a bridge to overcome the differences between the group of nine countries that have called for the mutualisation of debt (the so-called ‘coronabonds’), including Spain, Italy and France, and the half a dozen governments that have always opposed Eurobonds, with Germany and The Netherlands in the lead.

But member states are now split over whether the recovery fund should channel the resources via loans or grants, as Spain included in a proposal circulated this week, to avoid a massive increase of debt levels.

Italian prime minister, Giuseppe Conte, backed Madrid during the conference call. “Grants are essential to preserve the single market, a level playing field, and to ensure a symmetric response to a symmetric shock”, he told the leaders.

Rutte, however, said that the recovery fund should be rather a loan-based system, while fiscal transfers should only be part of the MFF, which is already a grants-based system.

Rutte warned that “it will take time” to finalise the details of the recovery fund and to agree on the MFF, on which negotiations failed to make any breakthrough in February.

EU leaders fail to agree on first post-Brexit budget as divisions grow EU countries failed to narrow deep differences over the bloc’s next seven-year budget as a group of net contributors refused to approve bigger spending and instead pushed for big cuts for farmers and poorer regions, in a bid to fill a €75 billion hole left by Brexit.

He added that it would be “highly beneficial if we can meet in person” to reach an agreement, even if that could only happen in June or later.

Michel said there had been a “very rational debate” and that leaders have a “real sense of urgency.” He was “optimistic because even if it is difficult, I feel there is a strong political will to act together.”

French President, Emmanuel Macron, noted the existing disagreements. “Some countries have made efforts, others are under domestic political constraints,” he explained.

Macron: we need EU coronavirus rescue package worth 5-10 points of GDP French President Emmanuel Macron said Europe’s response to economic turmoil caused by the coronavirus crisis required financial transfers to the hardest-hit regions and not just loans.

He stressed the need for a “strong and united response” across the eurozone, pointing out that the responses so far have been “asymmetric”.

Meanwhile, German Chancellor, Angela Merkel, reaffirmed her readiness to increase her contributions to the MFF to cope with the pandemic.

Merkel open to big EU recovery fund, but says more clarity needed first German Chancellor Angela Merkel signalled on Thursday (23 April) she was open to offering major financial support for a coronavirus recovery package worth as much as €2 trillion, but wanted to see how it would be used before committing.

Merkel explained that there would be “real budgetary transfers, not just loans” to the most affected regions and sectors.

But she said that Europe needs to asses first the actual financial needs, and added that she would be “pleased if we could not just mention magnitudes, but rather base them on solid calculations”.

[With additional reporting by Beatriz Ríos, Claire Stam, Philipp Grüll and Gerardo Fortuna]

[Edited by Benjamin Fox]