Law360, London (July 21, 2020, 11:56 AM BST) -- European Union leaders agreed on Tuesday to a €750 billion ($860 billion) recovery package for member states struggling with the economic fallout from the COVID-19 pandemic, which will be financed by fresh debt to be repaid with the help of new taxes and levies.
After four days of negotiations the 27 heads of state gave the European Commission temporary authority to raise the money through the capital markets until the end of 2026.
The €750 billion that the commission can raise will be handed out through EU programs in the form of loans of up to €360 billion and grants of up to €390 billion. Member states must repay the loans before the end of 2058.
"We are aware that this is a historic moment for Europe," the commission president, Ursula von der Leyen, said, adding that the emergency recovery plan now "tightly links'' funding sources to the repayment process. "This is a big step forward with a clear timetable," she said.
The council said the recovery package will create jobs and help to repair the immediate damage caused by COVID-19. The commission presented the exceptional proposals at the end of May at the request of member state governments, but some countries, known as the frugal four, have resisted the plan.
"The conclusions present a balanced solution catering for the interests and positions of all member states," the council said in its conclusions published on Tuesday.
"It is an ambitious and comprehensive package combining the classical [multi-annual financial framework] with an extraordinary recovery effort destined to tackle the effects of an unprecedented crisis in the best interest of the EU."
That framework, which governs the bloc's spending, was budgeted at €1.074 trillion between 2021 and 2027.
The council said the EU will work toward introducing new taxes under the new framework for repaying the borrowing under the pandemic recovery plan. These could include a financial transaction tax and a national contribution calculated from the weight of unrecycled plastic packaging waste, starting in January.
EU leaders agreed to propose a new cross-border carbon tax and a digital levy in early 2021 with the aim to have them both in place by January 2023. They also asked the European Commission to draft a proposal for expanding the bloc's emissions trading system, possibly extending it to include the aviation and maritime sectors.
Germany has pushed for a tax on financial instruments, but with little success. The financial transaction tax, which was proposed in 2011, has failed to gain the unanimous support of EU member states necessary to be adopted.
The tax that is being proposed at EU level would involve a minimum 0.1% tax rate on trades of all kinds of financial instruments, except for derivatives, which would be taxed at a minimum rate of 0.01%.
--Additional reporting by Matt Thompson. Editing by Ed Harris.
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