Spain Seeks 1.5 Trillion Euro Recovery Fund Using EU Perpetual Debt

Spanish Prime Minister Pedro Sánchez attends an extraordinary plenary session on measures to alleviate the consequences of the pandemic caused by the CCP virus in Madrid on March 18, 2020. Mariscal/Pool/Getty Images

The Spanish government will propose to its EU partners that they create a 1.5 trillion euro ($1.63 trillion) recovery fund financed through perpetual debt to aid countries worst-hit by the CCP (Chinese Communist Party) virus crisis, a discussion paper shows.

Prime Minister Pedro Sanchez will outline the proposal to his European colleagues during a summit on April 23, in a bid to lead the negotiations looking for an acceptable solution after the Netherlands and Germany ruled out common debt issuance, a foreign ministry source told Reuters.

The new fund proposed by Spain would be financed by perpetual debt backed by the EU budget, and countries would count it as transfers and not debt.

The Costa Deliziosa is docked at the port of Barcelona to disembark passengers amid a national lockdown to fight the spread of the CCP virus, in Barcelona, Spain, on April 20, 2020. Pau Barrena /AFP via Getty Images

Spanish chef Benito Gomez cooks food for people in need in Ronda, during a food distribution campaign amid a national lockdown to prevent the spread of the CCP virus in Ronda, Spain, on April 18, 2020. Jorge Guerrero/AFP via Getty Images

“It would be a different mutualization scheme than we had in mind ... but it is an option that can be agreed by all,” the source said.

The European Commission would act as the main borrower in the scheme that would use the EU budget as a last resort to leverage the new debt.

The Spanish proposal is aligned with that presented by EU Budget Commissioner Johannes Hahn.

According to the three-page Spanish discussion paper, seen by Reuters, the transfer of funds should be frontloaded to start on the first day of 2021 and be executed during the next two to three years.

Spain wants the repayment of the interest to rely on a new set of European taxes, such as a border carbon tax and other green financing.

Sanchez will ask the bloc to work towards a “full tax harmonization.”

By Belen Carreño and Inti Landauro

Epoch Times staff contributed to this report.