May 26, 2020 / 4:19 PM / 2 months ago

Netherlands wants loans for EU recovery, Germany favours grants

FILE PHOTO: Dutch Prime Minister Mark Rutte speaks during a news conference in the Hague, Netherlands March 19, 2020. REUTERS/Eva Plevier

BERLIN/AMSTERDAM (Reuters) - The Netherlands insists that the planned European Recovery Fund should hand out financial aid for virus-hit member states only as loans rather than grants that would not have to be paid back, Dutch Prime Minister Mark Rutte said on Tuesday.

“We need an emergency recovery fund to stimulate the recovery. We believe this should consist of loans, without any mutualization of debts,” Rutte told reporters during a joint video conference with Armin Laschet, state premier of Germany’s most populous state North Rhine-Westphalia.

Laschet said he supported a 500 billion-euro euros (445.2 billion pounds) proposal put forward by German Chancellor Angela Merkel and French President Emmanuel Macron for the fund to hand out grants to European countries affected the most by the coronavirus pandemic.

“The Netherlands and Germany will only emerge stronger if Spain, if Portugal, if France, if Greece also have a chance to recover,” Laschet said, adding that it was now up to EU leaders to decide about the right path for this.

The European Commission will issue on Wednesday a new proposal for a long-term European Union budget and a coronavirus recovery fund to help economies in the bloc rebound from recession.

Both measures are controversial because they entail transfers of wealth across the 27-nation bloc, and views differ widely on how that should happen. The recovery package is also creating new faultlines because it entails financing through debt issued in the bloc’s name.

Merkel and Macron have proposed a 500 billion euro Recovery Fund that would offer grants to European Union regions and sectors hit hardest by the coronavirus pandemic.

But Austria, Sweden, Denmark and the Netherlands - also known as the ‘Frugal Four’ - have stated their opposition to the plan and called for a loans-based approach instead of grants.

Reporting by Michael Nienaber in Berlin and Bart Meijer in Amsterdam, editing by Emma Thomasson and Pritha Sarkar

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