The European Commission is to propose a new stimulus package to help the eurozone recover from the economic damage caused by the COVID-19 pandemic, European Commission President Ursula von der Leyen said on Saturday.
“To ensure recovery, the commission will propose changes in the MFF proposal that will allow [it] to address the fallout of the coronavirus crisis,” Von der Leyen said in a statement.
The MFF is the multi-annual financial framework, the EU’s long-term budget.
“This will include a stimulus package that will ensure that cohesion within the union is maintained through solidarity and responsibility,” she said. “At this juncture, the president is not excluding any options within the limits of the treaty.”
Last month, EU leaders failed to reach agreement on an extension to the upcoming seven-year budget plan, for next year through 2027. They could not agree either on how much each sector should receive.
Although talks have continued since then, the pandemic has spread further across Europe, which now accounts for two-thirds of the global death toll.
That has changed the outlook of many political leaders, with the whole EU bloc facing the prospect of slipping into recession by the end of the year.
However, the 27 EU leaders could not agree on the best economic response to the economic damage wrought by the pandemic during a videoconference on Thursday.
They asked the EU nations to present proposals next month.
“The commission will participate in these discussions and stands ready to assist, if supported by the eurogroup,” Von der Leyen said.
“In parallel, the commission is working on proposals for the recovery phase within the existing treaties,” she said.
Italy, Spain and France — the hardest-hit EU countries so far — are pushing for Europe to find a way to better share the financial burden.
However, the Netherlands and Germany are skeptical, fearing that their big-spending southern neighbors will exploit the crisis to push for a pooling of eurozone government debts.
Separately, the European Central Bank (ECB) on Friday asked eurozone banks to freeze dividend payments “until at least October 2020” to preserve liquidity that can be used to help households and companies through the pandemic.
The Frankfurt institution also asked banks not to buy back shares, another tool to reward shareholders, at a time when policymakers everywhere are taking unprecedented steps to support the global economy.
“The ECB expects banks’ shareholders to join this collective effort,” it said in a statement.
The measures would “boost banks’ capacity to absorb losses and support lending to households, small businesses and corporates during the coronavirus pandemic,” it said.
The ECB’s suggestion is likely to be welcomed by eurozone citizens, many of whom vividly remember the taxpayer bailouts of global banks during the 2008-2009 financial crisis.
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