A sweeping €1.85tr stimulus strategy to rebuild Europe's economy from the wreckage of the coronavirus crisis has been unveiled by the European Commission today, promising a green infrastructure spending blitz to help put the continent on a path towards net zero greenhouse gas emissions by 2050.

The Commission promised to place its Green Deal ambitions to deliver a 'climate neutral' economy and establish the bloc as a world leader in digital technologies at the forefront of its sweeping package of financial proposals, which include a fresh €750bn investment plan, a restructured EU budget for 2021-27, and a re-drafted list of priorities for 2020.

The proposed stimulus package calls for a "renovation wave" of buildings and infrastructure in support of the Green Deal, as well as investments in circular economy efforts, renewable energy projects, clean hydrogen infrastructure, green transport networks, and an enhanced Just Transition Fund for workers.

It follows widespread support and vocal calls for a green economic recovery from the pandemic led by businesses, major investors, influential politicians, and millions of healthcare workers and citizens over the past two months, heaping pressure on the Commission to step up to the plate. Just today, a group of MPs and campaigners set out demands for a major green recovery drive in the UK, while a report by financial analyst McKinsey estimated that mobilising €75-150bn of capital towards low carbon projects could yield €180bn-350bn in benefits and cut carbon emissions by up to 30 per cent by 2030.

Today's stimulus package does not focus solely on decarbonisation, and the breadth and scope of its proposals are still being worked through by stakeholders, but Commission President Ursula von der Leyen made a point of stressing the need to use the stimulus to drive long-term climate action.

"This is Europe's moment," she said. "The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalisation will boost jobs and growth, the resilience of our societies and the health of our environment."

"Our willingness to act must live up to the challenges we are all facing," she added.

The Commission said it wanted to "harness the full potential of the EU budget" to boost the economy and secure its long-term future in the midst of a deepening recession, proposing a new 'Next Generation EU' funding instrument that would see it borrow €750bn to channel into EU programmes.

In addition, to making funds available "as soon as possible to respond to the most pressing needs", it is seeking to restructure the EU's 2021-27 budget to bring forward €11.5bn of spending to be used in 2020.

These measures, backed by "targeted reinforcements" to the upcoming EU budget, would bring the total financial firepower outlined by the Commission today to €1.85tr, it said.

Some of the spending would be divvied up into a new Recovery and Resilience Facility of €560bn to offer financial support for investments and reforms "including in relation to the green and digital transitions", encompassing €310bn in grants and €250bn in loans for all member states. At least 25 per cent of these loans and grants would have to be spent on climate action, it said.

Moreover, the package sets out plans to beef-up the proposed Just Transition Fund to €40bn to support workers and regions affected by the net zero transition. And it proposes a €15bn reinforcement for the European Agricultural Fund for Rural Development, to support "structural changes necessary" in line with the Green Deal and targets supporting the Commission's biodiversity and 'Farm to Fork' food security strategies.

Looking further forward, the plan reiterates proposals to implement a carbon border mechanism to prevent 'carbon leakage' in trade in and out of the EU, which it estimates could reap between €5bn and €14bn for the bloc each year

"Relaunching the economy does not mean going back to the status quo before the crisis, but bouncing forward," the Commission said in a statement. "We must repair the short-term damage from the crisis in a way that also invests in our long-term future."

The overall figure touted by the Commission for its recovery nevertheless falls short of the €2tr of new investment demanded by MEPs earlier this month, who had adopted a resolution calling for a "bold and ambitious" strategy centred around the net zero transition and the goals of the Paris Agreement.

As such, today's strategy garnered a mixed reception from environmental groups and NGOs. Jeremy Wates, secretary general of the European Environment Bureau (EEB) - a coalition of 160 environmental groups - said the Commission's package was a "step in the right direction" but that it was still "far from perfect", citing a lack of focus on habitat destruction and biodiversity loss.

In addition Climate Action Network (CAN) Europe's finance and subsidies policy coordinator, Markus Trilling, warned the package failed to curb support for fossil fuels, allowing countries too much leeway for national spending on high carbon infrastructure which he warned "runs the risk of more polluting activities being subsidised".

"The lack of a more ambitious climate action target for the EU budget and the new recovery fund risks derailing the European climate and environmental objectives," Trilling added.

But the thrust of the recovery package was broadly welcomed by green businesses and investors.

Stephanie Pfeifer, CEO at the Institutional Investors Group on Climate Change (IIGCC), which represents members managing €30tr of asset, said the plan would be "well received by investors" and provided a "roadmap for a stronger, more resilient and sustainable economic future".

Eliot Whittington, director of the European Corporate Leaders Group - which counts Unilever, Coca-Cola European Partners, IKEA, Tesco, Sky and EDF among its members - welcomed the Commission's "bold package", but cautioned that "time will be needed to unpick exactly how much green finance has been earmarked".

"The recovery package is not only about helping businesses and citizens to bounce back - it is also about preparing for the future," he said. "This package can drive investment into the key transformations needed to meet Europe's net zero emissions target, including buildings renovation, renewable energy, clean mobility, industrial innovation and more sustainable land use and food systems."

Despite the disruption caused by the Covid-19 pandemic, the EU Commission today indicated it broadly intends to continue with much of its 2020 work plan for the Green Deal, promising to set out its proposal for a more ambitious 2030 climate target later this year, amid calls for Europe to ramp up to a 55 per cent cut in emissions from 1990 levels.

In the immediate term, the proposed recovery plan still requires approval from the EU Council and Parliament. The Commission said it would be seeking "rapid political agreement" by July in order to "get the economy back on its feet and build for the future".