The European Commission on Wednesday proposed a €750-billion ($821-billion) aid package to help Europe's economic recovery from the fallout of the coronavirus pandemic, which has killed over 350,000 people globally.

In a statement on its website, the EU governing body proposed the creation of a new recovery instrument, dubbed Next Generation EU, to address the economic damage caused by the outbreak.

"Next Generation EU [consists] of €750 billion as well as targeted reinforcements to the long-term EU budget for 2021-2027 [and] will bring the total financial firepower of the EU budget to €1.85 trillion," the statement said.

The recovery fund would be embedded within the next long-term EU budget.

"The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment," European Commission President Ursula von der Leyen said in the statement.

"This is Europe's moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer.”

Such an aid package requires all 27 member states to agree for the plan to take effect.

€11.5 billion for 2020

The plan comes as the 27-member bloc faces the prospect of a deep EU-wide recession. Nearly all member states have breached EU deficit limits as they have rushed to spend on supporting healthcare systems, businesses, and jobs.

In the proposed plan, the EU will borrow €750 billion for the recovery fund on the financial markets, which would be repaid through future EU budgets.

The fund will include a new "Recovery and Resilience Facility" totaling €560 billion that will offer financial support for investment and reforms. The instrument will be made up of €310 billion in grants and €250 billion in loans. 

EU member states have been divided on whether loans or non-repayable grants are the best approach for funding the bloc’s recovery. 

The Commission also proposed an amendment to its current financial framework for 2014-2020 to make €11.5 billion in funding available this year.

Member states disagree on best approach

The much-anticipated proposal follows a €500 billion plan put forward last week by France and Germany — often seen as the motor of the European Union. Their plan also called for the EU to borrow money in financial markets and to distribute it to industries and countries hard hit by the pandemic in the form of grants.

A German government spokeswoman said Berlin welcomed the progress made in Brussels.

"We are happy that the (European) Commission has taken up elements of the Franco-German proposal."

German Finance Minister Olaf Scholz admitted that the package was not agreed yet, but said he was confident that it would be.

"You can already say that the probability is very high that an agreement will be reached," said Scholz.

French President Emmanuel Macron also welcomed the proposal, hailing a "crucial day for Europe."

"We should all move quickly and adopt an ambitious agreement with all of our European partners," Macron tweeted.

Italian Prime Minister Giuseppe Conte said the plan vindicated Italy's stance from the start.

"Great signal from Brussels, it goes exactly in the direction Italy was pointing to. They called us visionaries because we believed this since the start," he wrote on Twitter.

"Now let's speed up the negotiation and free up the resources quickly," he added.

The Spanish government said it considered the Commission's proposal to be a good basis for further negotiations.

In a statement, it welcomed the proposal as responding to "many of Spain's demands."

Opposition from the 'Frugal Four'

But Austria, Denmark, the Netherlands, and Sweden — known as the "frugal four" — have protested that proposal, saying the aid should instead come in the form of low-interest loans. They have said they would not agree to a mutualization of debt nor to an increase in the EU budget. The new budget period begins on January 1, 2021.

A Dutch diplomat, however, told the German dpa news agency that the proposal was unlikely to pass in its current form.

"The positions are far apart and this is a unanimity file, so negotiations will take time," the diplomat told dpa. "It's difficult to imagine this proposal will be the end state of those negotiations."

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