The European Commission proposed a €1.85 trillion ($2 trillion) multiannual budget for the bloc on Wednesday. The plan includes a €750 billion ($825 billion) new recovery instrument to help relaunch the European economy after the COVID-19 crisis. The recovery fund — named Next Generation EU — tops the EU’s ordinary €1.1 trillion ($1.2 trillion) budget for the period of 2021-2027.The €750-billion scheme will support the economic recovery by providing €250 billion worth of loans and €500 billion in grants to EU member states.
Contrary to the EU budget, which is mostly based on member states contributions, the European Commission will finance the fund by taking credits at the international financial markets. This is an unprecedented move from the EU institution in a bid to resolve the deep divisions among EU countries.
Italy and Spain will be the main beneficiaries of the scheme by receiving €172 billion and €140 billion support, respectively.
However, roughly half of the aid consists of loans that these countries need to repay to the European Commission, which is far from what they had asked for.