The Netherlands, Austria, Denmark and Sweden have submitted their own Covid-19 recovery plan to the European Commission as debate over the EU’s strategy for offsetting the impact of coronavirus continues.

The Netherlands and its partners, known as the ‘frugal four’, say they support the establishment of a one-off emergency fund but do not back debt sharing or a ‘significant’ increase in the EU’s next seven-year budget.

The Netherlands has been at the forefront of a campaign not to ‘give gifts’ to southern European countries and this proposal is based on a ‘modernised’ EU budget that will make sure countries are ‘better prepared for the next crisis,’ Politico reported.

The fund would be temporary and one-off and should not lead to ‘debt mutualisation’ Politico quoted the four countries’ position paper as saying.

The ‘loans for loans’ approach is in line with the fundamental principles of the EU, the Financial Times said, and recipients of loans would have to display a ‘strong commitment to reforms’.

Last Monday, Germany and France submitted their joint deal involving a €500bn recovery fund offering grants rather than loans. The move was welcomed by southern EU countries and praised as an important breakthrough.

The Franco-German plan envisages borrowing from the market in the name of the EU and says that countries benefiting would not have to repay the cash.

‘We are convinced that it is not only fair but also necessary to make the funds available now… that we will repay gradually through several future European budgets,’ German chancellor Angela Merkel said at a press conference.

Solidarity

The seriousness of the crisis meant ‘solidarity’ must be the order of the day, Merkel said.

The plan was welcomed by EU chief Ursuala von der Leyen as constructive and as acknowledging the ‘scope and size’ of the challenges the EU faces.

The European Commission is expected to unveil its own proposals for funding the recovery on Wednesday. Insiders suggest it is a combination of grants and loans.

All 27 member states will have to agree to any recovery plan before it can be implemented.

SER

Last Thursday, Dutch government policy advisory group SER said the Netherlands must show solidarity with the EU member countries which have been hardest hit by the coronavirus crisis, in its own interest.

Instead of a strict system of loans subject to conditions and reforms, the government should show more leniency and aim for ‘a responsible form of risk sharing’, SER’s Coronacrisis think-tank said.

The think-tank, which includes unions, employers, advisory bodies CPB and SCP and Dutch bank DNB and was set up in March, ‘deviates from the government line’, chairwoman Mariëtte Hamer told the FD.

It is in the Dutch interest to makes sure the southern European countries in particular do not drown in debt and find their way out of the crisis as soon as possible, Hamer said.