Angela Merkel warns coronavirus will trigger worst recession since World War Two

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Angela Merkel gave a downbeat statement from Berlin during the virtual EU summit. – Christian Marquardt/Shutterstock

Angela Merkel warned EU leaders that Europe faced the worst recession since the Second World War during summit talks about the coronavirus crisis on Friday.

The German Chancellor said the EU needed to agree a recovery plan to kickstart the economy before the end of the summer at the European Council meeting, which was held online because of the pandemic.

The heads of state and government of the 27 EU member states discussed a European Commission proposal for a €750 billion rescue fund and a boosted €1.1 trillion EU budget for the next seven years.

Christine Lagarde, the head of the European Central Bank told leaders the EU’s economy was in “a dramatic fall” but, beset by divisions, the heads of state and government made no progress in agreeing a massive stimulus plan.

“Very, very difficult times” were ahead, Mrs Merkel said before calling for another EU summit where leaders would meet in person as soon as possible.

Charles Michel, the president of the European Council, said the next summit would be held in mid-July.

Emmanuel Macron, the French president, said a deal had to be struck before the end of July because of the pressure of the Brexit trade negotiations, which will be entering their endgame.

The rescue plan is controversial because it involves common borrowing from the market, which is unprecedented on such a huge scale, higher national contributions to the budget and new EU tax-raising powers for the commission.

The proposal, which requires unanimous support, is opposed by the “frugal four” of Austria, the Netherlands, Denmark and Sweden. It is backed by France, Germany and “club med” countries such as Italy and Spain, who were worst hit by the pandemic.

Mark Rutte, the prime minister of the Netherlands, said, “There are still huge difference of opinion. The atmospherics were great in the meeting but the differences in point of view were very great.”

He added there was no reason for hurry and that “no big damage” would be caused if the July summit was a failure.

Sebastian Kurz, Austria’s chancellor, said that the plan should not create a “debt union” before the summit. He and the other frugals want the funds to be paid out as loans which must be repaid rather than grants.

Mr Macron said that out of €750 bn , preserving the €500 bn euros in grants was France’s top priority.

Mr Kurz said that the recovery funds should only be paid out if they bring about reforms.

“Do they make us more competitive?,” he asked, “Or will it be blown off by being spent on ideas like a universal basic income or travel vouchers?”

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