A recovery fund worth €750bn (£670bn; $825bn) has been proposed by the EU's executive Commission to help the EU tackle an "unprecedented crisis".
The package will be made up of grants and loans for every EU member state.
Economies across the 27-nation EU bloc have been ravaged by the Covid-19 pandemic, but several southern states had big debts even before the crisis.
Commission President Ursula von der Leyen said "this is Europe's moment".
"Things we take for granted are being questioned. None of that can be fixed by any single country alone," she told the European Parliament. "This is about all of us and it is way bigger than any of us."
The Commission has dubbed the plan Next Generation EU. Without the backing of all 27 EU member states, it cannot go ahead. But Germany and France have backed plans for the money to be raised on the capital markets.
Economy Commissioner Paolo Gentiloni said the fund was a "European turning point" that would be added to instruments that had already been launched.
Spain and Italy have seen the highest number of deaths in the EU during the coronavirus crisis and, in the wake of the financial crisis, are particularly keen on grants rather than loans being added to their public debt.
Several "frugal" states object to taking on debt for other countries. Austria, the Netherlands, Denmark and Sweden reject the idea of cash handouts to relatively poorer countries.
What did the Commission president say?
Mrs von der Leyen said the €750bn fund would be made up of €500bn in grants and €250bn in loans. It would be raised by lifting the EU's resources ceiling to 2% of EU gross national income and would be reliant on the EU's strong credit rating.
When added to a proposed €1.1 trillion budget for 2021-27, the €750bn recovery fund would bring to €1.85tn the amount that the Commission says will "kick-start our economy and ensure Europe bounces forward".
When added to an earlier €540bn initial rescue package, that would amount to a total of €2.4tn, said the Commission president.
The EU's much-cherished four freedoms had to be fully restored, she added, those of freedom of people, goods, services and capital.
She said "this is an urgent and exceptional need for an urgent and exceptional crisis".
The money raised on the capital markets would be paid back over 30 years between 2028 and 2058, but not later.
The Commission says it could be paid back in several ways:
- A carbon tax based on the Emissions Trading Scheme
- A digital tax
- A tax on non-recycled plastics
Commissioner Maros Sefcovic says recovery has to be based on green and digital policies as well as "increased resilience" and lessons learned from the Covid-19 crisis.
The budget will be "equipped with increased firepower to be able to generate massive investment at the scale and speed needed to kick-start all our economies", he says.
The European Central Bank has played a key role in helping eurozone countries emerge from the debt crisis with its stimulus programme of bond-buying. But concerns about the ECB programme's future were raised earlier this month when Germany's top court ruled that it violated the German constitution.
The UK has left the EU so is unlikely to have any involvement in the fund as it stands.
Will the plan work?
By Gavin Lee, BBC News Brussels
Ursula von der Leyen's pitch was just the start of what will take a huge effort to get all member states on side, especially as the Commission wants this agreed at the next leaders' summit in three weeks' time.
But I get a clear sense there's not yet an overall majority in favour.
Southern Mediterranean countries have all indicated initial support. One Italian diplomat told me, if agreed, Italy may be eligible for grants of up to 5% of the country's GDP.
Many, including Poland, Hungary, Bulgaria and Lithuania, won't commit either way until they've read the small print. "With these things, the devil is often in the detail," one Bulgarian official told me.
An Austrian diplomat was encouraged €250bn would be raised through loans but suggested €500bn in grants was a "non-starter" at this point.
The feeling here is it will need a face-to-face meeting between leaders to forge a compromise, and that's not likely to happen until internal borders are reopened over the summer.
What do EU leaders say?
French President Emmanuel Macron spoke of an "essential day for Europe" while Italian Prime Minister Giuseppe Conte said: "Now let's speed up the negotiation and make the resources available soon."
Spanish Prime Minister Pedro Sanchez said the plan included "many of our demands" and was "a starting point for negotiations". Greece said it was a "bold proposal" and it was now up to member states to "rise to the occasion".
There was a more cautious reaction from some of the so-called "frugal" states.
Danish Foreign Minister Jeppe Kofod said the current budget plan was "simply too high". Dutch Prime Minister Mark Rutte had already warned on Tuesday that a recovery fund "should consist of loans, without any mutualisation of debts".
How green is the recovery fund?
Plans for the long-heralded Green Recovery Fund have been given a partial welcome by environment groups, even though exact details are yet to be revealed.
Campaigners have argued that it is vital for the EU to spend its post Covid-19 stimulus on projects that will also help tackle the climate crisis.
They say the package should drive investment into projects needed to meet Europe's net zero emissions target.
That includes building renovation, renewables, clean transport, industrial innovation and better land use and food systems.
But there's annoyance that Brussels has given way to regions by allowing them to spend their funds however they want until 2022 - even if that means investing in schemes which are good for job-creation but bad for the climate.
Ratio of government debt to GDP
176.6%Greece has highest public debt ratio
134.8%Italy is second highest
98% Belgium & France
95.5% Spain & Cyprus