BRUSSELS—The European Union set out a €750 billion ($824 billion) coronavirus recovery plan and €1.1 trillion budget proposal to lift the region from its economic slump, in a move that threatens to intensify the political fights already dividing the bloc.

If implemented, the plan would represent a historic step in knitting together the national finances of the EU’s 27 countries. The proposal from the European Commission, the EU’s executive arm, follows a similar Franco-German plan set out last week and would allow significant…

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