$2 trillion deal to rebuild Europe's economy
2020-07-23![$2 trillion deal to rebuild Europe's economy $2 trillion deal to rebuild Europe's economy](https://varindia.com/storage/news/uploads/2018/02/5f19457faaaab.jpg)
The European Commission will borrow the money on financial markets and distribute just under half of it - €390 billion euros ($446 billion) - as grants to the hardest hit EU states, with the rest provided as loans. Leaders also agreed a new EU budget of nearly €1.1 trillion ($1.3 trillion) for 2021-2027, creating combined spending power of about €1.8 trillion ($2 trillion).
The deal focuses on providing funding across three pillars: helping businesses rebound from the pandemic, rolling out new measures to reform economies over the long haul, and investing to help protect against future crises. It came after days of deadlock and fractious talks that were described as some of the most bitterly divided in years.
The European Union is battling a savage recession triggered by the pandemic, and the hardest-hit countries such as Italy and Spain urgently need fresh economic relief.
The European Commission said earlier this month that it expects the EU economy to shrink 8.3% in 2020, considerably worse than the 7.4% slump predicted two months ago.
The European Commission's original proposal was to distribute €500 billion ($573 billion) via grants, while €250 billion ($286 billion) would have been offered as loans. But the volume of grants had been vehemently contested during the summit. The so-called "Frugal Four" countries - Netherlands, Denmark, Austria and Sweden - were worried it would burden their countries with debt to fund the spending of other governments.
Using grants would have required net contributors to the EU budget, including the "Frugal Four," to pay in more. Relying on loans, meanwhile, would mean saddling highly-indebted countries such as Italy with even more liabilities.
The new agreement means the European Union will become a major borrower in global financial markets for the first time. It plans to repay the money by 2058.
To help do that, it will look for fresh ways to raise funds. The Commission said in the text of the deal that it would propose a "digital levy" for tech companies, and consider a new tax on financial transactions.
It also said it would consider updating an existing emissions trading program, which caps the amount of greenhouse gases companies are allowed to emit without facing fines. It could extend the restrictions to the aviation and maritime industries.
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