Brussels seeks ‘consensual’ economic response to COVID-19 crisis, shifting away from coronabonds

Commission President Ursula Von Der Leyen gives a joint press conference with European Council President Charles Michel after a conference call with European leaders on COVID-19 at the European Council. [EPA-EFE | Stephanie Lecocq]

With “all options on the table”, European Commission president Ursula Von Der Leyen is looking at a consensual response among member states to the economic fallout from the COVID-19 crisis, her spokesman said on Monday (30 March), shifting away from controversial debt mutualisation advocated by Italy.

“We need to have options which are quick, effective and based on consensus among all actors, and in particular among member states,” Eric Mamer told reporters during a video briefing.

“The central more important issue in this whole debate is to ensure that we have a cohesive response to the crisis, that we do not have a response that would create a divide between member states based on their capacity to deal with the effects of the crisis,” he argued.

To achieve this, the Commission president considers that the central element in the recovery plan should be an updated long-term EU budget for 2021-2027 – the so-called Multiannual Financial Framework.

“She sees a strong Multiannual Financial Framework as a key part of this recovery plan,” von der Leyen’s spokesman added, arguing this would allow deploying investment all across the EU.

Von der Leyen’s commitment to a new budget follows calls from lawmakers in the European Parliament’s budget committee who urged the Commission last week to “realistically, responsibly and urgently update its MFF proposal to take account of the new challenges and needs deriving from a post-Corona world.”

The EU executive is already putting together an alternative seven-year budget blueprint but no further details have been unveiled, including whether the size of the previous Commission proposal – 1.11% of gross national income – would be maintained.

The Commission has already made use of the existing budget to support the most affected EU countries, channelling cash through Cohesion funds – aimed at addressing economic and development imbalances across the bloc – and the European Solidarity Fund whose scope was widened to cover public health crises.

The EU’s existing seven-year budget will expire at the end of 2020 and EU leaders were expected to have reached an agreement on a new blueprint by the time the COVID-19 crisis erupted.

MEPs demand a new long-term budget in response to coronavirus 

Leading MEPs are urging the European Commission to update its proposal for the EU’s 2021-27 budget and factor in the response that will be needed to tackle the consequences of the coronavirus pandemic.

The ‘coronabonds’ question mark

On Thursday (19 March), EU leaders took stock of the coronavirus pandemic  during a video conference. In particular, they explored potential measures to support EU economies which are coming under unprecedented strain by the crisis.

Nine member states including the most affected by the virus – Italy, Spain and France – demanded a common instrument to mutualise the new debt derived from the extra investments required to confront the crisis.

However, Germany and The Netherlands strongly opposed it. While initially, von der Leyen supported the call, by stressing the need for consensual instruments, she appears to be shifting away from that option.

In an interview with German news agency DPA over the weekend, von der Leyen said “the word coronabond is really just a slogan” – or “Schlagwort” in German. “Behind it, though, there is the larger question of guarantees. And there, the concerns in Germany, but also in other countries, are justified.”

The statement unleashed a spate of criticism in Rome and Madrid.

Responding to the critics, the Commission’s chief spokesman Eric Mamer argued that the controversy was caused by a misinterpretation of the expression “Schlagwort”. Von der Leyen didn’t mean to say coronabonds were a “slogan” but rather “a concept, a keyword”, without any negative connotation, Mamer argued. The key question was to understand the mechanics behind the proposal, he added.

“If they help and if they are correctly structured, they will be used,” von der Leyen said only a few weeks ago.

EU open to 'coronabonds' to cushion economic fallout – von der Leyen

The European Commission is ready to consider backing common debt issuance in the eurozone to help the bloc weather the massive economic impact of the coronavirus outbreak, its president said on Friday (20 March).

EU division

Unable to find consensus, EU leaders on Thursday tasked the Eurogroup to come up with a recovery plan within two weeks to address the economic consequences of the COVID-19 outbreak.

If president von der Leyen is settling for the consensual option, ‘coronabonds’ are out of question. However, pressure from Rome, Madrid and Paris is mounting as the health crisis worsens.

French President Emmanuel Macron warned during last week’s EU summit that what’s at stake in this crisis “is the survival of the European project.”

Spanish Prime Minister Pedro Sánchez echoed this assessment during a press conference on Sunday (29 March) demanding a “courageous” response from the EU.

“Our generation remembers the financial crisis in 2008, the delay and the limits to the European response to that economic catastrophe. This time Europe cannot fail, it must not fail. Because even the most pro-European countries, as it is the case of Spain, need proofs of the EU’s compromise,” Sánchez warned.

EU finance ministers will be meeting next week with the goal of coming up with a recovery plan able to satisfy the demands of all member states. On Tuesday (31 March), von der Leyen,  European Council chief Charles Michel, Eurogroup chairman Mario Centeno and European Central Bank president Christine Lagargue will have a preliminary discussion on the matter.

Leaders clash over stimulus against pandemic, pass hot potato to Eurogroup

EU leaders on Thursday (26 March) continued to disagree over the economic response to the coronavirus as Northern countries rejected the idea of issuing joint debt, known as “corona bonds”, proposed by nine member states to finance the recovery.

(Edited by Frédéric Simon)

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