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After five days of exhausting debate, 27 European state leaders have finally agreed upon a relief plan to the tune of €750 billion to ease the dire economic straits perpetuated by the COVID-19 pandemic. Reaching a deal has proven to be far from easy, with opposition from the “frugal” four -- Denmark, Sweden, The Netherlands, and Austria.

Originally, it was proposed by the European commission to offer €500 billion in non-repayable grants to countries hit hardest by the pandemic, such as Italy and Spain. After a heated and lengthy debate, the proposal was altered to provide €390 billion in grants and €360 billion in loans, all of which would be funded by the new economic reconstruction fund.

For the frugal four, the primary concern with the proposal is centered around debt since all EU member states will be required to fund the €390 billion in grants as well as the €360 billion in loans. To sweeten the deal, the frugal states will receive an increased rebate for their contributions to the fund, a compromise akin to the one secured by Margaret Thatcher in 1984 where the U.K. received discounts for its considerably large budget contributions.

Other aspects of the proposal have been changed as well, including contingencies on disbursement of funds to states with failed economic reforms and rule of law issues, argued for by France and Germany. Both Poland and Hungary, who have a history of questionable legal rulings, refused to accept these terms leading to a softening of the contingencies in the final proposal.

As a result of the pandemic, the EU has experienced an economic downturn not seen since the Great Depression. According to the European commission, the EU’s economy is expected to shrink by 8.3% in 2020, which is markedly worse than the original 7.4% prediction offered only two months ago. It remains to be seen whether the economic stimulus plan will act as an effective bulwark against the pandemic.

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