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| - European Union chief Ursula von der Leyen will on Wednesday propose a 750-billion-euro post-virus recovery fund for Europe, but will have to win over sceptical member states to push it through. The global coronavirus outbreak has already thrust the EU into its deepest ever recession, and Von der Leyen's proposal will set out to help the worst affected countries. If passed, the proposal would be the biggest EU stimulus package in history and could see Europe-wide taxes on plastics, carbon emissions and big tech -- a major power boost for Brussels. The virus has killed more than 173,000 people in Europe and put its economy in a deep freeze, with businesses only slowly reopening and tight controls on borders still stifling travel and trade. The plan comes under big pressure from Italy and Spain, Europe's first victims of the outbreak and too burdened with heavy debts to alone rebuild their economies. To answer their plight, German Chancellor Angela Merkel dropped a bombshell last week by endorsing a plan to allow the commission to borrow 500 billion euros ($550 billion) on markets to fund the recovery. Merkel, who is in the final years of a long stint as chancellor, also said that the aid could come through grants rather than loans, another policy U-turn by Berlin. But the French-German plan faces a counter-proposal from the so-called Frugal Four: northern EU member states who have traditionally opposed giving more cash to Brussels or transferring it to the indebted south. They firmly oppose paying out aid in grants, preferring loans that come with stern conditions and outside oversight, and reduce risk to their own taxpayers. They also accuse southern Europeans of living beyond their means and piling on debt instead of choosing cost-cutting reform. The grants versus loans debate is no small matter, with Italy, Greece and Spain already crippled by mountains of debt, despite embarking on painful reforms since the 2008 financial crisis. The European Central Bank on Tuesday warned that more debts incurred by countries already under pressure could spook the markets and endanger the euro single currency. The European Central Bank (ECB) strongly backs joint borrowing by the EU to check that threat. A top EU official said that Von der Leyen's compromise would propose about one trillion euros through a mix of grants and loans, though sources said the final amount could be lower. The fund will be linked to the EU's long term budget for 2021 to 2027 and both must be adopted unanimously by the 27 member states and ratified by MEPs. Von der Leyen will first deliver the plan to the European Parliament before hosting a news conference. "We potentially see a sea change in European macro-economic policy," said Greens MEP Philippe Lamberts. "It's not yet a fiscal union, because it's limited in time, but it creates an important precedent," he added. Von der Leyen will then devote the next weeks and months to tough negotiations along with the EU Council head Charles Michel, who chairs EU summits. Diplomats predict talks could drag on until at least July when Germany will take over the rotating EU presidency. Financing the plan could take even longer as it would require ratification by national parliaments across all EU member states -- an unpredictable process. Von der Leyen's commission has already delivered more modest recovery aid, including insurance for strained employment schemes and suspending rules on running up deficits. The 19 countries that use the euro single currency have already made available 540 billion euros in loan guarantees for emergency health spending. The commission, the EU's watchdog, has also approved two trillion euros in state aid since the beginning of the crisis, almost half by Germany. arp/dc/jv
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