European Union leaders agreed on an unprecedented stimulus package worth 750 billion euros ($860 billion) to pull their economies out of the worst recession in memory and tighten the financial bonds holding their 27 nations together.
The agreement, in the early hours of Tuesday after more than four days of acrimonious negotiations in Brussels, required the unanimous approval of the member states and represents a victory for German Chancellor Angela Merkel and French President Emmanuel Macron, who drafted an early outline for the proposal in May. The emergency fund will give out 390 billion euros of grants and 360 billion euros of low-interest loans.
Almost a third of the funds are earmarked for fighting climate change and, together with the bloc’s next 1 trillion-euro, seven-year budget, will constitute the biggest green stimulus package in history. All expenditure must be consistent with the Paris Agreement’s goal of cutting greenhouse gases.
The emergency funds will not only unleash vital financial support to the southern European economies hit hardest by the virus, but serve as validation that the bloc can offer meaningful solidarity to members in need. With the death toll among EU citizens climbing past 130,000, investors were looking for a display of unity to sustain the rally in stocks.
Read More: EUROPE REACT: EU’s Survival Instinct Overcomes Frugal Dissent
“I am very relieved,” Merkel said afterward. “We have come up with a response to the biggest crisis the EU has faced.”
Italian bonds climbed on the deal, with the 10-year yield spread over Germany, a key gauge of risk in the region dropping as low as 151 basis points, the lowest level since February. The euro edged 0.1% lower to $1.1440, having hit a four-month high Monday.
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