'Frugal Four' call for EU reconstruction fund to be based on loans

Leaders in Austria, Denmark, Holland and Sweden have called for all spending tied to a proposed economic reconstruction fund for the European Union to be 'responsible' and financed via debt, instead of grants.

In a letter sent to the Financial Times, the leaders of the so-called 'Frugal Four' group of countries said: "What we do is about solidarity, which goes hand in hand with sustainable European growth [...] Belonging to a close and deep circle of friend and allies, we owe that to each other."

The letter, which was sent ahead of the next EU leaders' summit on 19 June, also stated that those leaders were willing to do more than had been set out by the European Commission in its proposals, but defended the need to respect important principles.

"How can it suddenly be responsible to spend €500bn in borrowed money and to send the bill into the future?

"Part of the EU Commission’s recent proposal is to find new ways for the bloc to finance itself. But there is no such thing as new or fresh money. Money spent will have to be earned and paid back, by taxpayers."

The best way to deploy funds for those that really needed them was via a time-limited fund - which they said that they fully supported - for the hardest hit countries, but based on loands "on the best possible terms", they argued.

The European Commission had proposed a €750.0bn fund of which €500.0bn would be disbursed as grants and the remaining €250bn in the form of loans.

"We are all affected by this crisis and it puts all national budgets under severe strain. So we must all have a realistic level of spending. More importantly money should be used… only where we know it can make a real difference."