There are now numerous Covid rescue plans on the table for European leaders to consider. There is no need to run them down here because Prof. David Cameron of Yale has provided an excellent summary of their provisions. Briefly, the central bone of contention is whether EU assistance will be provided in the form of loans, ultimately to be reimbursed by member state recipients, or as grants. In both cases, the EU itself will amass the funds to be disbursed by borrowing in its own name, and it will repay those loans in one of two ways: through taxes it will somehow acquire the power to levy, or through repayment of secondary loans to member states. There is also a further question: to what extent will grants or loans to member states be conditioned on domestic reforms and other political criteria?
The European Commission is proceeding as though the Merkel-Macron proposal for loan-financed grants will ultimately be approved by the Council, although there is no assurance this will happen, given the declared opposition of the so-called Frugal Four: the Netherlands, Austria, Sweden, and Denmark. Other countries have expressed reservations in less adamant terms. But even the Frugal Four recognize that something must be done lest the Single Market crumble and the EU founder. It’s just that they want no part of outright grants and want all transfers to be made in the form of loans.
