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EU ties recovery plan to national budget reviews

Jim Brunsden in Brussels

Brussels said its coronavirus recovery plan would be closely linked to annual recommendations the EU makes to member states to underpin the bloc’s growth strategy.

Valdis Dombrovskis, European Commission executive vice-president for economic policy, said there would be “a clear link” between “country-specific recommendations” the EU publishes each year and the “recovery and resilience facility” Brussels will unveil next week as part of its pandemic response.

The annual recommendations, part of Brussels’ broader programme of reviewing national budgets, would “provide guidance to member states” in preparing their recovery plans, which would be used by governments to support requests for EU funds, Mr Dombrovskis explained.

“It’s basically the same concept, that we would be financing reform and investment packages of member states,” he said.

Mr Dombrovskis and Paolo Gentiloni, the EU’s economy commissioner, said the proposals were not about pressuring governments to enact reforms favoured by Brussels but about adding financial muscle to national efforts to meet “shared priorities”. The plan “will provide firepower, more firepower to the semester process”, Mr Gentiloni said.

Brussels’ recovery fund plans are expected to draw inspiration from Franco-German proposals for a €500bn fund unveiled this week. Paris and Berlin back the idea of EU borrowing to finance recovery spending, leaving it to Brussels to present detailed proposals.

Brussels’ latest set of country-by-country recommendations have been entirely rewritten because of the pandemic. The bloc called on capitals to prioritise healthcare spending, but added that member states must remain wedded to the EU’s medium-term goals of a green and digital transformation.

Brussels confirmed all eurozone countries were expected to breach the currency bloc’s budget rules this year as they ramp up spending to combat the economic downturn, but said it would not instigate enforcement proceedings.