London (CNN Business)The European Commission has proposed giving hundreds of billions of euros to EU countries that have seen their economies devastated by the coronavirus pandemic, a massive relief effort designed to ensure parts of the bloc aren’t left behind when the recovery comes.

The executive arm of the European Union unveiled a plan on Wednesday that would see it raise €750 billion ($825 billion) on financial markets. Two-thirds of the money would be distributed to countries via grants, while the remainder would be offered as loans.

“Our willingness to act must live up to the challenges we are all facing,” European Commission President Ursula von der Leyen said in a statement. The pitch still needs to be approved by all 27 member states.

Germany and France, the two largest economies in Europe, said last week that they would support the extensive use of grants that do not require repayment, an acknowledgment of the economic trauma caused by the pandemic. The Commission has forecast that GDP in the 19 countries that use the euro will contract by 7.75% this year, a record.
European Central Bank President Christine Lagarde said Wednesday the damage could be even greater, predicting a loss of between 8% and 12% of GDP.

The European Commission’s plan was welcomed by southern European countries but could still run into opposition from more fiscally conservative northern countries, which only want to offer loans.

Over the weekend, a group of nations known as the “Frugal Four” — Austria, the Netherlands, Sweden and Denmark — rejected the compromise struck by Germany and France.
This is a developing story and will be updated.
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