A man exercises in Paris on Tuesday as France eases lockdown measures taken to curb the spread of the COVID-19 pandemic. Photo: AFP

The road to clinch an EU recovery plan remains difficult, officials warned on Tuesday, despite a surprise entente between Berlin and Paris to back a 500-billion-euro ($546 billion) rescue.

France and Germany are the most powerful of the 27-member bloc and together make up roughly half of the eurozone's single currency economy.

Anything of significance agreed at the EU level requires their backing, and Germany's surprise decision to endorse a post-coronavirus plan depending on jointly issued debt was seen by many as historic.

But, behind the scenes, EU sources warned that the outcome remains unknown and that the 500-billion-euro proposal could fail, given member state divisions.

"In order to reach an agreement all 27 EU member states will be involved," said Charles Michel, head of the EU Council, whose unenviable job will be to host a summit to seal a deal.

In the landmark gambit, French President Emmanuel Macron and German Chancellor Angela Merkel proposed that the EU executive arm, the European Commission, borrow on the markets to raise the recovery funds.

Joint borrowing is a huge taboo in many EU capitals and officials warn it was not at all certain that Austria, the Netherlands, Sweden and a few others would sign on despite Germany's decision to go along amid its long-held reservations.

"We still have to convince other member states, four in particular: Austria, Denmark, Sweden and the Netherlands," French Finance Minister Bruno Le Maire said. 

"And we shouldn't hide the fact it will be difficult."

Danish Finance Minister Nicolai Wammen, who supports the so-called "frugal" line, was not won over, saying that "there is a well-known position from Denmark, and that has not been changed by the German-French proposal." 

In Brussels, one European diplomat said tersely that "we take note" of the proposal.

The post-coronavirus recovery plan will officially be proposed on May 27 by the European Commission which will do its best to reflect the position of the capitals.

It will be part of the already painful negotiations toward a long-term EU budget, where the northern "frugals" oppose more indebted members to the east and the south.  

"I don't think the Franco-German proposal will ever be officially discussed," a European source said. 

"The commission still has to come up with a text that we hope won't be discarded immediately, as is generally the case," she said, referring to EU traditions of intense and long-drawn out budget haggling.

EU leaders will likely thrash out the deal in June, with the final plan then facing a vote in the European Parliament, where MEPs support high levels of spending.

"It's a proposal. Nothing is done and everything is to play for among the EU member states," said economist Anne-Laure Delatte, of the CEPII think-tank in Paris.

AFP