The European Commission on Thursday proposed a new €100 billion ($109 billion) relief initiative that will provide loans to member states who need funds to support jobs. The Commission plans to use the European Union’s strong credit rating to tap financial markets and then lend the funds cheaply to member states.
The program is meant to encourage companies to reduce employees’ hours instead of laying them off completely, a model used in Germany. Workers would receive compensation for hours not worked.
“In this coronavirus crisis, only the strongest of responses will do,” Commission President Ursula von der Leyen said in a statement. “Every available euro in the EU budget will be redirected to address it.”
The loans would be guaranteed by member states and “directed to where they are most urgently needed,” according to the Commission. The measure still requires approval from the bloc’s 27 members.
EU countries have committed huge sums of money in recent days to supporting business and workers though the deep recession that is unfolding, and EU limits on budget deficits have been relaxed to allow them to borrow more. The European Central Bank has also promised to pump hundreds of billions of euros into markets this year to prevent the shock triggering a new financial crisis.
But the bloc is deeply divided over whether to issue debt, dubbed corona bonds, to raise long-term financing for all member states to help pay for measures to cope with the pandemic and support economic recovery once it has passed. German Chancellor Angela Merkel, backed by the leaders of Austria and the Netherlands, has opposed doing so.
There are particular concerns about Italy, which has been hit hardest by the pandemic and already has significant debt.
The European Union could be forced to take additional action soon. The bloc’s finance ministers are scheduled to meet by video conference on Tuesday. EU leaders could convene again later in the week.
Europe’s largest economy, Germany, is likely to shrink more this year than it did during the global financial crisis, German economy minister Peter Altmaier said Thursday.
Meanwhile, the jobless numbers are rising fast. In Spain, unemployment in March rose by 302,265 people to 3.5 million, the largest increase on record, the country said Thursday.
The number of French employees on partial unemployment support has reached 4 million and is “strongly increasing,” Labor Minister Muriel Pénicaud said Thursday.
The United Kingdom, which left the European Union earlier this year, said the number of people claiming universal credit welfare benefits rose to 950,000 during the last two weeks of March.
— Nadine Schmidt, Barbara Wojazer, Mark Thompson, Max Ramsay, Tim Lister, Al Goodman and Ingrid Formanek contributed reporting.