The EU has put forward proposals for a "Next Generation" rescue package worth some €750bn in borrowing to bankroll the continent's recovery efforts.
Ursula von der Leyen, president of the European Commission, described the package as "an urgent and exceptional need for an urgent and exceptional crisis."
Addressing the European parliament, von der Leyen said: "Things we take for granted are being questioned. None of that can be fixed by any single country alone. This is about all of us and it is way bigger than any of us."
The main winners are Spain (very high grant share), Italy (largest all-in allocation), and especially Poland in a nod to the largest country in the CEE. Just for comparison, Poland can expect to receive almost as much money in grant format as France."
French president, Emmanuel Macron, called it "an essential day for Europe." However, the announcement also revealed a rift between the bloc's northern and more southern member states. Mark Rutte, prime minister of The Netherlands, spoke for the north when he said: "We believe this [recovery fund] should consist of loans, without any mutualisation of debts."
Andreas Billmeier, sovereign research analyst at Legg Mason affiliate Western Asset said: "Today's proposal by the EC combines a small (financial) upgrade to the draft 2021-27 EU budget framework worth €1.1trn, with a recovery instrument termed Next Generation EU worth €750bn.
This instrument is meant to borrow in markets upfront and dispense that money across a number of new and old EU programs, of which two-thirds will be in the form of grants and the rest in loans, Billmeier added.
"Based on the preliminary pre-allocated funding model, we think that the main winners are Spain (very high grant share), Italy (largest all-in allocation), and especially Poland in a nod to the largest country in the CEE. Just for comparison, Poland can expect to receive almost as much money in grant format as France."
"It is important to note that this package requires unanimity to be adopted. While already reflecting previous comments by member states on the budget framework, today's proposal has added a whole new dimension to the discussion in the form of the recovery facility.
He concluded: "That said, the countries that objected to the French-German grant-based proposal from a couple of weeks ago may find limited comfort in the fact that the Commission's proposal also includes a substantial loan element. In the end, it is a question of how much members are willing to chip in over time - not now - to fund these extraordinary but temporary expenditures or whether they are, alternatively or in addition, willing to grant additional tax-raising responsibilities to the EU, also proposed today. In some sense, this would be true progress toward a central fiscal authority."