The European Commission President announced plans to introduce new taxes on big business, air travel and imports to help pay for the bloc’s coronavirus response. Under the German’s blueprint, the Brussels-based executive would borrow €500 billion on international markets in order to issue grants to pandemic-stricken regions and industries. It will result in huge increases national contributions to the EU’s next seven-year budget.
And there are also concerns the Commission’s new taxation and spending powers, effectively creating a de facto EU finance ministry, will detract from member state sovereignty.
The scheme will direct most of the funds towards Spain, Italy and France, leaving poorer countries to shoulder the burden for their recoveries.
An EU diplomat said: “By moving to the South and the East the Commission has avoided any difficult decisions or compromises at this stage.
“As a result, the leaders will have been set back significantly in their efforts to reach an acceptable compromise fast.”
Leaders will discuss the recovery fund at a European summit on June 19, likely to be a frantic affair.
The plans, which are based on a Franco-German proposal put forward by Emmanuel Macron and Angela Merkel, require the unanimous support of all 27 EU capitals before they can be implemented.
The Dutch, Austrian, Danish and Swedish governments have all voiced their opposition for the creation of mutualised EU debt.
A joint diplomatic paper put forward by the so-called “Frugal Four” said the four countries “cannot agree” to any “instruments or measures leading to debt mutualisation nor significant increases in the EU budget”.
The fiscally conservative member states want grants issued to Spain and Italy to be linked to the introduction of austerity politics.
A Dutch diplomat said: “Our position is well known: The starting point is that the Netherlands is willing to help and wants to cooperate on a European level to fight the crisis.
“We want to do this in a way that strengthens member states and the EU as a whole.”
“The positions are far apart and this is a unanimity file; so negotiations will take time. It’s difficult to imagine this proposal will be the end state of those negotiations,” they added.
Hungarian MEP Eniko Gyori said the plan would lead to a “moral hazard” by encouraging countries to rack up huge bills.
She said: “It cannot happen that poorer member states finance the wealthier ones.”