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EU Hardliners to Issue Rival Plan to Fund Economic Recovery

Bloomberg logo Bloomberg 5/20/2020 Diederik Baazil
a person standing in front of Angela Merkel, Emmanuel Macron posing for the camera: Angela Merkel arrives to address a joint press conference with Emmanuel Macron, attending via video link, at the Chancellery in Berlin, on May 18. © POOL/AFP via Getty Images Angela Merkel arrives to address a joint press conference with Emmanuel Macron, attending via video link, at the Chancellery in Berlin, on May 18.

(Bloomberg) --

Four governments opposed to handouts for the European Union countries hardest hit by the coronavirus pandemic are planning to release their own plan to fund the economic recovery.

In a challenge to a proposal set out by Germany and France, Austria, the Netherlands, Denmark and Sweden will publish their framework, Dutch Prime Minister Mark Rutte told reporters on Wednesday. The counter bid could be released later this week or next, according to an official familiar with the talks, who asked not to be identified because deliberations are private.

German Chancellor Angela Merkel and French President Emmanuel Macron on Monday threw their weight behind a plan to allow the EU’s executive arm to issue 500 billion euros ($548 billion) of bonds, with the proceeds going to help member states most affected by the pandemic. Controversially, recipients of the funds won’t need to pay the EU back and the securities would be financed collectively. That means richer countries, like Germany, as well as the plan’s four critics, would be bankrolling poorer ones.

The plan represents a remarkable about-face for Germany, and the proposal, which needs unanimous approval by all 27 members of the EU, faces stiff headwinds from the bloc’s more frugal members.

“We still have to convince other member states, four in particular: Austria, Denmark, Sweden and the Netherlands,” French Finance Minister Bruno Le Maire said on Tuesday. “And we mustn’t hide the fact that it will be difficult.”

Austrian Chancellor Sebastian Kurz threw cold water on the Franco-German plan on Tuesday, saying that all four countries remain opposed to any direct handouts.

Eastern EU members are also unsure about the proposal -- concerned that their subsidies may be diverted to help countries hardest hit by the pandemic. After a video conference Tuesday between Merkel and members of the so-called Visegrad Four -- Poland, Slovakia, the Czech Republic and Hungary -- Czech Prime Minister Andrej Babis said he still had “many questions” about the proposal.

Warsaw indicated that it had serious doubts and would need to hold more discussions, according to an official familiar with the discussions.

While Polish Prime Minister Mateusz Morawiecki believes that the proposal is a move in the right direction, more negotiations are needed to iron out the issue of how the funds would be divided among the countries, said the official, who asked not to be identified because the talks were private.

“Poland could play hardball,” said Daniel Gros, director of the Brussels-based Centre for European Policy Studies. New member states, which joined the EU in 2004 and 2007, are “the only ones who can still derail an agreement.”

The northern states can only “nibble at the edges, making eligibility more stringent,” he said.

(Updates with Mark Rutte comment and new timing in the second paragraph.)

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