France says EU recovery fund cannot come at expense of long-term budget

(C) Reuters. French Junior Minister for European Affairs Amelie de Montchalin arrives at a General Affairs Councilc meeting at the EU headquarters in Brussels

PARIS (Reuters) – France said on Tuesday a European Union recovery fund to help countries deal with the economic impact of the coronavirus crisis should not be an excuse for fiscally conservative countries to demand cuts to the bloc’s long-term budget.

France and Germany have proposed to their EU partners the creation of a 500-billion euro ($550-billion) recovery fund made up of grants that would be paid to their hardest-hit regions.

It was opposed by four countries who call themselves the ‘Frugals’ — Austria, Sweden, Denmark and the Netherlands — and want a loans-based approach instead.

The debate about the recovery fund comes at a time EU countries are also negotiating the bloc’s long-term budget, its so-called “multi-annual financial framework” (MFF), which the ‘Frugals’ were also trying to reduce.

“My role is to avoid robbing Peter to pay Paul,” Amelie de Montchalin, France’s European affairs minister, told reporters. “You have a certain number of countries, the Frugals in particular, who talk a lot today about a recovery fund, while their real goal is not to have an MFF which is too big.”

She said France would push to have both a recovery fund with grants and a long-term budget with enough funding for programmes such as defence, the transition to a green economy and agricultural policy.

She said she did not want the MFF weakened as it was “a tool to make this recovery permanent,” de Montchalin said.

France, the top beneficiary of EU agricultural subsidies, has resisted calls by northern countries to cut the bloc’s farming budget. It has also pushed for the creation of a defence fund to help countries cut reliance on U.S. suppliers.