French-German recovery plan opposed by 'frugal' EU nations

Dutch Prime Minister Mark Rutte

Austria, Denmark, Sweden and the Netherlands showed the first sign of opposition to the tabled French-German plan that would increase the EU budget in order to hand out grants to pandemic-stricken regions and industries.

Living up to their reputations for budgetary frugality the four countries are working on a proposal for a European recovery fund that will have tough conditions attached for countries that seek financial help. And it could derail or water down a French-German blueprint presented Monday that was seen as a groundbreaking way to deal with the economic fallout of the coronavirus crisis.

Dutch Prime Minister Mark Rutte on Wednesday mentioned - but pointedly did not endorse - the French-German proposal for a €500 billion fund that would see countries borrow together and make outright grants to help countries through the recession. Asked about it, Rutte called the Merkel-Macron suggestion, “a proposal. We’re also working on a proposal. We’re working closely with Denmark, Austria and Sweden. There will be a lot of proposals.”

The European Union’s executive commission is expected to unveil its own proposal for a recovery fund next week, based on which the EU member states will then have to find a compromise.

The Netherlands has always taken a tough stance on economic aid for struggling southern European nations and the coronavirus pandemic does not appear to have changed that. Without going into detail, Rutte said the proposal by the nations dubbed by some the Frugal Four would likely include tough conditions for loans.

“If you want help, you have to make far-reaching reforms so that you can look after yourself next time,” Rutte told reporters. “Otherwise I can’t explain it to the Netherlands that we want to help.”

Rutte acknowledged that there is an economic interest for a trading nation like the Netherlands in southern Europe recovering from the hammer blow of the coronavirus crisis.

“But if they ask for our support, the least we can do is ask: What are you going to do to ensure that you can save yourselves next time?” he said.

The fund would be a one-off part of the EU’s budget and take advantage of EU institutions’ ability to borrow at extremely low interest rates for long periods. It adds to a 540 billion-euro package agreed among finance ministers from the 19 EU countries that use the euro. That included loans from the eurozone bailout fund that would have to be repaid. Since the proposal is only for a limited one-time fund during a crisis, it would represent incremental change. But some were seeing it as potentially the harbinger of more EU central spending.

Vienna called for the money to be distributed via loans instead of the grants proposed by French President Emmanuel Macron.

Denmark’s finance minister Nicolai Wammen said his country has a “well-known position” on the coronavirus fund and “that has not been changed by the German-French proposal”.

His French counterpart Bruno Le Maire conceded that the plan might not have sufficient support to ever come to fruition. He said: “We still have to convince other member states and we shouldn’t hide behind the fact it will be difficult.”

Macron and Merkel said that the fund they propose would send money starting in 2021 to the areas hardest hit by the virus outbreak and target sectors that are priorities for EU economic policy such as digitalization and fighting climate change.

More on this subject: Coronavirus

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