EU Leaders Reached a Historic Agreement on Tuesday

The coronavirus pandemic created a lot of problems for countries worldwide. On Tuesday, the 27 European Union governments reached an agreement over a new fiscal stimulus, but it was very hard to reach it in the first place. It took several versions to persuade all leaders.

The EU plans to spend 750 billion euros ($857 billion) as part of the new fiscal stimulus. Moreover, the funds will be distributed among the countries and sectors most affected by the coronavirus pandemic.

Leaders of the EU spent four days combing over some important details. For example, how to divide the amount between grants and loans. Also, how to oversee its investment as well as how to link it with the EU’s democratic values.

Let’s have a look at this agreement. Leaders agreed to allocate 390 billion euros out of the total 750 billion funds in the form of grants. As a reminder, several months ago, France and Germany proposed to allocate 500 billion euros of grants.

Moreover, the EU made the decision to end the net debt issuance in 2026. They will also repay all the new debt by 2058.

There are other interesting details as well. For instance, member states will also have to develop plans to show how they plan to spend money allocated as part of the new fiscal stimulus. Furthermore, their European counterparts will have to approve of these so-called Reform and Recovery plans.

Historic agreement and EU’s next budget

The European Union’s next budget, which will fund initiatives between 2021 and 2015, is 1.074 trillion euros in total. Notably, combined with the recovery fund, the EU plans to spend 1.824 trillion euros. According to French President Emmanuel Macron, thanks to this recovery fund, it will be possible to almost double the European budget for several years.

The EU committed 30% of the total expenditure from the recovery fund as well as the next EU budget to tackle the problems connected with climate. Based on the information provided by the EU, it wants to be climate neutral by 2050.

Notably, the recovery fund will be available from next year, more precisely from January. The EU is working hard to cope with the economic impact of the coronavirus pandemic. In April, finance ministers approved a 540-billion-euro package of a short-term fiscal stimulus. Moreover, governments of the member states also allocated funds to support their economies.

The European Central Bank is also buying government bonds as part of its Pandemic Emergency Purchase Program. The central bank plans to spend 1.35 trillion euros on this it.