The COVID-19 outbreak and its subsequent lockdown have exponentially hammered the economic activity in the European Union. In order to contain the Coronavirus transmission, European countries were forced to block business activities and manufacturing operations that led to an inevitable sharp economic downturn. EU Commission’s forecast has stated that the bloc is facing the deepest recession since the Great Depression, with a 7.5% decline in the economic activity.
Significantly, European countries are working on reopening their economies to restart their businesses after several weeks of lockdown. Attempting to break the deadlock over rescuing the economy in the region, Germany and France jointly proposed the creation of a recovery fund worth €500 billion ($543 billion) to support the economic revival.
In a recent video call, French President Emmanuel Macron and German Chancellor Angela Merkel called for the proposal, which will allow the bloc to borrow money in financial markets to financially assist the hard-hit sectors of the economy. As per media reports, money would be sanctioned to the businesses in the form of grants rather than loans, which will be repaid from the EU budget. In the new action plan, France and Germany have called for a green European Union recovery, suggesting potential roadmaps for all sectors to achieve the goal.
Welcoming the proposal, European Commission President Ursula von der Leyen said that it “rightly puts emphasis on the need to work on a solution with the European budget at its core.”
However, French President Macron maintained that a deal between France and Germany alone cannot be interpreted as an agreement of all the 27 member states. He called for the EU’s executive Commission to draft a proposal representing all the EU member states.
Additionally among other response measures, France announced a state-guaranteed loan scheme, assuring 70 percent of loans and aid to companies in a bid to strengthen their financial position. The German Chancellor has also pledged unlimited cash to businesses that are hard-hit by the ramifications of the global health crisis through loan expansions and other measures.
While the member states are stepping up their efforts to alleviate the impact on the region’s economy, the proposal introduced by France and Germany can be viewed as a crucial step forward in the economic recovery of the European Union. Meanwhile, the European Parliament on May 15 called for the Commission to present a much-needed economic stimulus plan that will assist the revival of the economy from the aftershocks of the pandemic.
MEPs have also urged for a €2 trillion package to sustain businesses, employees, and other stakeholders in the battle against the deep economic recession created by the novel Coronavirus pandemic. Amid these developments, Brussels has also been facing criticism over its slow response to the crisis.