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Budget 2021

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"Repair and Prepare": EU unveils 750 billion euro plan for coronavirus recovery

The aim is also to protect the European Union's single market of 450 million people from being splintered by divergent economic growth and wealth levels as the 27-nation bloc emerges from its deepest-ever recession, which is expected this year.

May 27, 2020 / 07:16 PM IST

The European Commission unveiled on Wednesday a plan to borrow on the market and then disburse to EU countries 750 billion euros in grants and loans to help them recover from their coronavirus slump, giving an immediate boost to the euro.

Much of the money is to go to Italy and Spain, the worst affected by the pandemic, which together would receive 313 billion euros in grants and loans.

The aim is also to protect the European Union's single market of 450 million people from being splintered by divergent economic growth and wealth levels as the 27-nation bloc emerges from its deepest-ever recession, which is expected this year.

Of the 750 billion euros, two-thirds would be in grants financed by joint borrowing and one-third in loans.

The grants, although controversial, are needed because Italy, Spain, Greece, France and Portugal already have high debt and are heavily reliant on tourism that was brought to a halt the pandemic. They will find it more difficult than more frugal northern nations to restart their economies through borrowing.

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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The euro rose on the news to trade at 1.1022 against the dollar, up from 1.0932.

The recovery fund package is in addition to the EU's long-term budget for 2021-27, which the Commission will propose being set at 1.100 trillion euros, is virtually the same as the proposal discussed by leaders in February of 1.095 trillion.

"In total, this European Recovery Plan will put 1.85 trillion euros to help kick-start our economy and ensure Europe bounces forward," the EU executive said in a document titled "Europe's moment: Repair and Prepare for the Next Generation".

CONCERN

The 500 billion euros in grants is in line with the wishes of the EU's two biggest economies - France and Germany - though some nations would rather see the recovery package comprise only loans.

The borrowing will have to be repaid, meaning higher national contributions to the EU budget in the future or new taxes assigned to the EU.

The Commission proposed new revenues in the form of a tax on plastics, some money from the CO2 emissions trading scheme, a digital services tax, a part of national corporate taxes and an import levy on goods produced in countries with lower CO2 emissions standards than the EU.

It also proposed the EU budget should get a bigger share of the Value Added Tax paid by governments to the EU.

Follow our full coverage of the coronavirus pandemic here.
Reuters
first published: May 27, 2020 07:10 pm

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