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European crisis aid: three-pillar model as a compromise?

The pandemic threatens to plunge many EU countries into recession – finance ministers are trying to counteract this. After a violent dispute over corona bonds, an approximation seems possible. Finance Minister Scholz presented a three-pillar strategy.

Despite the bitter dispute over the corona bonds, a first compromise on European financial aid in the corona crisis has probably been initiated. Eurogroup leader Mário Centeno told the Süddeutsche Zeitung that he saw “broad support” for a three-part package. “These three measures form a safety net of around half a trillion euros.” The issue of common European debts would thus be postponed until the reconstruction phase after the Corona crisis.

At a video summit last week, the EU countries had quarreled over the question of whether so-called corona bonds – i.e. common European bonds to finance the EU countries – are necessary in the crisis. Italy, Spain and other EU countries are in favor of these corona bonds. Germany, the Netherlands and other EU countries are against it. The EU finance ministers are now to develop new models by next Tuesday. Then there would be consultations.

Scholz presents three-pillar strategy

According to information from the dpa news agency, France and Germany could jointly propose this three-pillar program mentioned by Centeno. Federal Finance Minister Olaf Scholz gave an insight into the three-pillar strategy before the meeting of EU finance ministers: “My suggestion is to use the existing instruments quickly and effectively and to give a common European response,” he told the newspapers Funke media group.

This should give Member States the opportunity to borrow from the European Stability Mechanism (ESM) “an amount equal to two percent of their economic output,” said Scholz. This would enable them to stabilize their public finances without having to pay high premiums: “For Italy, that would be around 39 billion euros.”

In addition, the European Investment Bank should be able to lend “50 billion euros to companies that urgently need it, following the example of the German credit institution for reconstruction (KfW),” said the Vice Chancellor.

In addition, EU members would have to be supported in dealing with suddenly growing unemployment figures. “The EU Commission has just put forward proposals that remind me of my idea of ​​unemployment reinsurance,” said Scholz. “This also helps the states to master the crisis.”

Scholz continued: “If we use these three instruments, it would be a very strong signal of solidarity in Europe in the fight against the corona virus.” Scholz rejected the demand from Italy and other EU countries for joint borrowing under corona bonds. “Italy wants a strong European response to the pandemic – and rightly so, and there should be one.”

Von der Leyen promotes “unifying proposal”

EU Commission President Ursula von der Leyen advertised in ARD extra: “It is important that we now have instruments that are there quickly, that are effective and that unite Europe.” She pleaded on the ZDF program “What now?” also for the “Sure” concept – this is the aid proposed by the EU Commission of up to 100 billion euros for short-time work in the EU countries. The concept is a “unifying proposal”: “This is lived European solidarity.” The concept envisages that the EU states promise guarantees of over 25 billion euros. With this backing, the EU Commission wants to raise 100 billion euros on the capital market and pass it on as loans to countries that could not finance themselves so cheaply.

On the use of the ESM euro rescue fund, von der Leyen said that with the credit lines being considered, the finance ministers were “very deep in discussion” about the conditions involved. Negotiations are currently underway. The possible program of the European Investment Bank (EIB) is intended to secure national promotional and commercial banks with short-term working capital loans and bridge financing up to 80 percent.

Italy insists on euro bonds

EU Commission Vice President Valdis Dombrovskis confirmed that work is underway to use the ESM. “We believe that it should be used under the current conditions,” he added. When asked about Corona Bonds, Dombrovskis said: “We are exploring all political options.” However, he stressed that the next European budgetary framework was particularly important. “This will be our Marshall Plan to fund the recovery.”

The Italian head of government Giuseppe Conte, however, continued to insist on common European bonds and now spoke of “European reconstruction bonds”. In the newspaper “La Repubblica” he used the English word “European Recovery Bonds”. The term “corona bonds” did not come up. Bonds critics also argue that their launch is a long way off. Conte thanked EU Commission chief von der Leyen in particular for the proposal of the “Sure” short-time worker program. But that is not enough, a joint development plan is necessary.



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