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Law360, London (May 15, 2020, 10:02 PM BST) -- The European Parliament voted Friday to block any budget that doesn't include a €2 trillion ($2.2 trillion) commitment, including common debt issuances, to disburse aid via grants to European Union countries dealing with the economic fallout of the COVID-19 pandemic.
The resolution says the disruption caused by the pandemic is affecting all EU countries equally and that access to funding should be made available to all of the bloc's 27 members, including those that don't use the euro.
Widening budget gaps amid the global outbreak of the novel coronavirus, which causes the respiratory disease COVID-19, have prompted a controversial proposal to replace the current system of national bond issuance with a common pool, known as coronabonds. In March, leaders in Belgium, France, Italy, Luxembourg, Spain, Portugal, Greece, Slovenia and Ireland signed a letter advocating such a plan, but Eurobonds, as they are also known, are staunchly opposed by several northern European countries, most vocally the Netherlands.
Each member of the bloc has a veto on fiscal issues, which means unanimous consent is needed for the proposal to become reality.
Friday's resolution also called for a range of new European tax measures including a single set of rules to calculate companies' taxable profits in the European single market, a financial transactions tax, a plastics tax and a carbon border tax. All those measures have been proposed in one form or another at a European level before.
While the Parliament does not have formal legislative power, which means its proposals do not automatically become law, the European Union budgets are subject to its approval. To date the Parliament has not rejected any budgets.
The recovery fund for the pandemic should be financed on top of existing and coming EU policies and "must not affect our long-term priorities and strategic objectives nor result in a smaller [budget]," the resolution said.
The document calls on the EU to finance the recovery by issuing €2 trillion worth of bonds to maximize fiscal "headroom." The funds should be "disbursed through loans and, mostly, through grants, direct payments for investment and equity," and disbursement should be managed directly by the European Commission, the resolution said. The commission is the EU's executive arm.
The document noted that the Parliament must give its consent for the budget and warned against presenting a budget where the recovery plan is financed at the expense of existing and upcoming programs.
Guy Verhofstadt, who sits with the classical liberal bloc in the European Parliament, said on social media that the resolution reflects his party's agenda.
"The European Parliament overwhelmingly backs our proposal to oblige the commission to come forward with a trillion-sized recovery fund for the real economy financed with EU bonds," Verhofstadt said.
The European Commission didn't immediately respond to a request for comment.
--Editing by Vincent Sherry.
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