European finance ministers reached agreement on an economic response to Thursday after several weeks of debate. the coronavirus crisis, leaving open the sensitive issue of so-called European bonds “corona-bonds“.
“We show that we can overcome our differences when faced with great threats“, welcomed the president of the Eurogroup, Mario Centeno.”It is for us an unprecedented reaction by its scale and speed“, he added.
We find in this agreement the three safety nets initially envisaged: to support the public finances of the States, preventive lines of credit which can reach 2% of the gross domestic product and coming from the European Stability Mechanism (ESM); for businesses (and in particular SMEs), liquidity guarantees provided by the European Investment Bank up to € 200 billion; and for workers, the program “SAFE“from the European Commission to guarantee up to 100 billion euros in national temporary unemployment programs.
Stimulus fund
In addition, a temporary and targeted stimulus fund has been agreed to support economic recovery, a sign of financial solidarity between member states. However, its operation is not specified. The conclusions of the great European financiers note the divergence of views between member states, while citing the fact that some of them are considering an instrument for pooling the debt. This is the case of so-called southern countries like Italy, Spain or France, but the idea of corona-bonds is rejected by so-called Nordic countries like the Netherlands, Germany or Austria.
French Finance Minister Bruno Le Maire hailed him “excellent agreement“including”500 billion euros available immediately“and”a stimulus fund to come“His German counterpart Olaf Scholz said the deal was”a great day for european solidarity“.
“It was absolutely necessary today to send a clear signal of European solidarity to families and businesses“said Belgian Minister Alexander De Croo.”Europe is also by their side. It is an important first step to respond to the most urgent needs quickly.“
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Italian Minister Roberto Gualtieri welcomed that European bonds had been, he said, “put on the table“and that the conditionality of the MES (European Stability Mechanism) had been removed.”We send the Council (heads of state and government) an ambitious proposal“, he welcomed.
This conditionality concerns access to the MES credit lines. Italy refused the use of this emergency fund set up in 2012 to respond to sovereign debt crises because it was conditioned by internal reforms which can prove painful, when the country is not responsible of the coronavirus crisis. The so-called Nordic countries were ready to let go of the ballast, but the Netherlands was dragging its feet. In the end, the only condition of access will be that the credits finance health expenditure directly and indirectly linked to the crisis.
Mario Centeno said he expects the measures to be operational within two weeks. They will have to absorb the first shocks, but it will take more to cope with the looming recession, he warned. The role of the 2021-2027 multiannual budget will be central in this regard, as will the stimulus fund to generate massive investments. It is up to the heads of state and government to draw the outlines. With or without euro-bonds? Dutch Finance Minister Wopke Hoekstra reiterated at the end of the meeting that it will be without.
The whole discussion now returns to the European Council. Its President Charles Michel welcomed the fact that the Eurogroup had agreed on a “solid set of instruments to respond to the Covid-19 crisis in a spirit of solidarity“.
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