The European Union will agree to borrow billions of euros from financial markets this summer, a European official predicted Friday, despite ongoing differences over how to deal with the economic shock from Covid-19.
European countries have battled over a plan to raise 750 billion euros ($847 billion) in public markets since the European Commission, the executive arm of the EU, presented the idea in late May. Negotiations are ongoing, but some member states are still reluctant to take the unprecedented step, fearing taking too much risk for their own taxpayers.
However, speaking at a Goldman Sachs virtual conference on Friday, European Commissioner Paolo Gentiloni said he is “confident” that member states will bridge their differences.
The Italian said he hasn’t seen “any door slamming,” only “serious criticism.”
“That makes me feel that there is an opening for a discussion,” Gentiloni said, adding that the details of the Commission’s proposal can be adjusted, but in the end its substance will be adopted.
The European Commission has never tapped markets on such a large scale. Supporters of the idea argue it is the right move at a time when all European economies are struggling with the coronavirus crisis. Opponents are wary of sharing debt with other nations that have been less fiscally sound.
The 27 European leaders will negotiate the Commission’s plan together for the first time next Friday during a video call. However, in ongoing preparatory meetings ahead of that call, European officials have mentioned there are differences beyond the concept of raising new debt.
An EU official, who did not want to be named due to the sensitivity of the talks, told CNBC Friday that there have been long discussions about the allocation of the new funds.
The same official explained that Eastern European nations claim the current plan would mainly support countries in the south.
There are also divergences over how much of the money raised should be given out as grants and how much should be loans. The European Commission suggested that 500 billion euros should be grants, but countries such as Austria, Denmark and the Netherlands favor a larger share of loans instead.
— CNBC