EU ministers to agree virus rescue plan, not ‘coronabonds’

Mario Centeno in Lisbon readies for Eurogroup teleconference on 24 March 2020. [Council Newsroom]

EU countries are nearing an economic rescue plan for European countries worst hit by the coronavirus outbreak, sources said on Monday (6 April), but not at the level of ambition called for by Italy and Spain.

The EU’s 27 finance ministers are to meet for a videoconference on Tuesday, where a deal to use the eurozone’s €410 billion bailout fund was expected to be agreed.

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.

However, with deep divisions between the rich northern countries and those in the south with heavy debt, ministers were expected to sideline a proposal to issue “coronabonds” which would pool borrowing among EU nations to fight the crisis.

A group of states including European heavyweights Italy, France and Spain has been imploring Germany, Austria and the Netherlands for common debt instruments to cushion the economic impact of the virus.

But conservative politicians in the north fear the plans would mean the eventual sharing of all sovereign debts and their taxpayers footing the bill for supposed southern profligacy.

German Chancellor Angela Merkel on Monday reiterated her government’s stance of activating the European Stability Mechanism bailout fund to help countries that needed it, but pointedly did not mention shared borrowing.

She also hailed the stimulus of €750 billion by the European Central Bank (ECB) towards averting economic catastrophe.

ECB unveils €750 billion stimulus against coronavirus

The European Central Bank unexpectedly announced just before midnight on Wednesday (18 March) that it would spend €750 billion in bond purchases to calm down sovereign debt markets, in the strongest signal in the euro area to date that it was ready to fight against the economic fallout of the coronavirus.

But France insists that the economic destruction caused by the COVID-19 crisis demands a new way of thinking in Europe and wants member countries to help each other in unprecedented ways.

France proposes a fund of EU’s 3% GDP against virus 

The EU should have a fund capable of issuing debt totalling up to 3% of EU’s GDP (gross national income), or around €450 billion, to support the most affected countries, which would be repaid in proportion to each member state’s GNI, according to an internal document seen by

‘Same speed’ recovery

“Nothing would be worse for Europe than for some states because they are richer get off to a quick start, while others because they cannot afford it, start slowly,” French Finance Minister Bruno Le Maire told broadcaster France 2.

“We all need to recover at the same speed in order to guarantee the cohesion, solidarity and unity of the eurozone and our common currency,” he added.

Sources said Germany and its allies would likely prevail in Tuesday’s videoconference, although ministers would also agree to continue discussions on ideas such as coronabonds.

Le Maire threatened to refuse the overall deal if this were not the case.

In an interview with German newspaper Frankfurter Allgemeine Zeitung, Le Maire added that “it doesn’t make sense to come together every 14 days or month in order to define new instruments under time pressure. We have to have all instruments available from the beginning.”

‘All possible instruments’

European Council President Charles Michel, European Commission chief Ursula von der Leyen, ECB chief Christine Lagarde and Eurogroup President Mario Centeno who chairs meetings of the eurozone finance ministers held a preparatory videoconference on Monday.

“We call on all members of the Eurogroup to look at all possible instruments in a resourceful and constructive way,” Michel tweeted.

In a statement, he said: “There is a lot of room for solidarity within the existing instruments and institutions. We have to exploit these tools fully and remain open to doing more. A strong package is in the making.”

The European Stability Mechanism was created in 2012 during the eurozone debt crisis to help states that no longer had access to borrowing on the markets.

Its programmes come with strings attached for the countries that use it; a heavy dose of conditionality that Italy and Spain say they will refuse.

Whatever is agreed by the ministers would then go to EU leaders who are expected to convene later in the month.

Also under discussion is a lending facility from the European Investment Bank for struggling small- and medium-sized businesses as well as a guarantee fund for certain national unemployment schemes to be run by the European Commission.


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