May 8, 2020 5:57 am
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 European Union flags fly outside the European Commission headquarters in Brussels
European Union flags fly outside the European Commission headquarters in Brussels, Belgium, February 19, 2020. Picture taken February 19, 2020 REUTERS/Yves Herman

May 8, 2020

By Michel Rose and Gabriela Baczynska

BRUSSELS (Reuters) – France has proposed that the European Commission issue bonds to finance a recovery fund for the European Union worth 1-2% of gross national income per year – or 150-300 billion euros – in 2021-23, according to a French proposal seen by Reuters.

The EU is debating how to kickstart growth after a slump caused by the coronavirus outbreak. The Commission, the EU executive, is due in the week starting May 18 to make a formal proposal on a new joint budget for all the 27 member states for 2021-27, known as the Multiannual Financial Framework (MMF), and an accompanying Recovery Fund.

“The size should be at least 1% to 2% of EU GNI per year over the next three years, which would provide the EU budget with a top-up of 150 to 300 billion euros each year between 2021 and 2023,” the French discussion document on the Recovery Fund said.

“Loans to member states could help closing the gap, but need to remain a top-up to grants. To ensure maximumded value, such loans should have a grace period, very long maturity and low interest rate … It is also essential that this fund be set-up as soon as possible, possibly before the entry into force of the next MFF.”

EU leaders agreed last month to build the fund but left most of the details unresolved.

Paris proposed the Commission make a swift one-off bond issuance of papers with maturity of 2-8 years to raise funds against an increased MFF headroom and guarantees by national governments. Such bonds could be rolled over for a long time before eventually being repaid by the EU budget.

(Editing by Alison Williams and Timothy Heritage)

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