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France, Germany Urge $546B EU Pandemic Recovery Fund

By Alex M. Parker · May 18, 2020, 9:19 PM EDT

France and Germany called Monday for a €500 billion ($546 billion) fund to help the European Union recover from the novel coronavirus pandemic.

While not specifying how EU countries would recoup the fund's cost, a joint statement by the two countries linked it to "fair taxation" of the digital economy as well as a minimum corporate tax — ideally achieved through a project by the Organization for Economic Cooperation and Development to reach a multilateral solution to these issues. Germany and France also reiterated support for a common corporate tax base at the EU, a measure that proponents say would stem tax avoidance among its member countries.

European countries have struggled to reach an agreement on how to fund the economic response to the global outbreak of the virus, which causes the respiratory disease COVID-19. The European Union Parliament voted Friday to block any budget that did not include at least €2 trillion ($2.2 trillion) in common aid as well as common debt issuances among the member countries. Smaller countries in the EU have called for EU-wide funding mechanisms to deal with the pandemic, while richer countries have balked at the potential cost.

Monday's announcement seemed to indicate a potential consensus on how the EU could move forward.

Germany and France's proposal, issued by the German Finance Ministry following a joint video conference with German Chancellor Angela Merkel and French President Emmanuel Macron, would raise money through common debt and target relief for the areas most affected by the pandemic.

Germany and France also said the pandemic should not stand in the way of addressing climate change, including the EU's 2030 emissions targets and the possibility of a carbon tax. They also said a coordinated response would enhance the EU's single market as well as free trade.

Last week, French Finance Minister Bruno Le Maire expressed commitment to achieving some form of digital taxation by next year, regardless of whether the OECD project succeeds. France enacted a 3% tax on online revenue in 2019 but has delayed its collection since the U.S. threatened retaliatory tariffs on French products such as makeup and wine. OECD officials have said they're still on track to finish their project by the end of 2020 despite the pandemic, which has forced them to conduct negotiations via teleconferencing.

The French and German finance ministries did not respond to requests for further comment. 

--Editing by John Oudens. 

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