Angela Merkel and Emmanuel Macron propose a major financial recovery fund worth €500 billion.

Both leaders have proposed that the EU borrows on the financial markets in order to disperse some €500bn through grants to European economies hit hardest by the coronavirus pandemic.

Under the Franco-German proposal the member states receiving the funds would not need to repay the cash.

Liability for the debt would instead be added to the EU budget, to which member states contributions vary according to the size and prosperity of their economies.

Should the proposal receive the endorsement of the 25 other member states, it would amount to a significant move towards a level of burden-sharing and fiscal transfers firmly opposed during past crises. The European commission would borrow the money under the EU’s name.

It would come on top of the bloc’s next budget — the Multiannual Financial Framework — and the €540 billion of loans already announced by the Eurogroup.

The money raised by the Commission would be used “in a targeted manner” to support sectors and regions particularly impacted by the pandemic.

Speaking during a virtual press conference with France’s president, Merkel said: “We are convinced that it is not only fair but also necessary to now make available the funds … that we will then gradually repay through several future European budgets”.