Saturday

6th Jun 2020

Coronavirus

EU stalemate after 16-hour meeting on economic aid

  • Mario Centeno, Portugal's finance minister, led the eurozone finance ministers' meeting - that lasted 16 hours without agreement (Photo: Council of the European Union)

EU finance ministers have failed - so far - to agree on a package to mitigate the economic fallout of the coronavirus pandemic, fuelling doubts if the bloc can manage a unified strategy to overcome the crisis.

Ministers held a 16-hour-long videoconference from Tuesday into Wednesday (8 April), but they have not overcome the divisions that mirror many of their efforts to deal with the debt crisis a decade ago.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Europe's economies now face the deepest recession since the Second World War, and ministers had hoped to agree on a €500bn programme to cushion the economic shock.

Southern states, spearheaded by Italy, which has been hardest hit so far by the pandemic, advocated for sharing the costs of the recovery and also loosening austerity conditions on loans.

Northern, fiscally-conservative countries, led by the Netherlands but supported by Germany and Austria, had been reluctant.

They fear that sharing the burden and weakening conditions would lead to a less-disciplined economic policy for highly-indebted southern EU countries.

Those same dynamics a decade ago made handling the debt crisis painfully difficult, bringing the eurozone area close to the brink of collapse.

Ministers will get together again on Thursday, but positions are unlikely to change significantly.

The dispute between the Netherlands and Italy over the conditions attached to the potential use of part of the EU bailout fund, the European Stability Mechanism (ESM) could not be bridged.

The ESM was to offer credit lines worth up to two percent of output of the EU members, or €240bn in total.

Normally ESM loans come with stringent austerity conditions. Italy wants to see them redesigned for the corona crisis.

"Because of the current crisis we have to make an exception and the ESM can be used unconditionally to cover medical costs," Dutch finance minister Wopke Hoekstra tweeted after the meeting.

"For the long term economic support we think it's sensible to combine the use of the ESM with certain economic conditions," he however added.

Disagreements over the exact wording on the future recovery plan, and a possible future joint debt mechanism to underpin it, also stymied any agreement.

The French government put forward a plan that would create a temporary reserve worth three percent of EU GDP for 10 years and would be funded by the joint issuance of debt.

The French plan resembles so-called 'coronabonds', backed by Italy and Spain, to jointly finance the economic fallout of the crisis.

"The Netherlands was and remains against the idea of Eurobonds, we think this will create more problems than solutions for the EU," Hoekstra said, referring to such joint debt.

"We would have to guarantee debts of other countries which isn't reasonable. The majority of the Eurogroup shares this view and does not support Eurobonds," he added.

Another measure ministers discussed was the creation of a guarantee fund, managed by the European Investment Bank (EIB), mobilising €200bn for companies.

The EU Commission also proposed to raise €100bn for an unemployment scheme.

Meanwhile, the commission has also suspended state aid limits and allowed countries to increase their debt and spend more on the economy.

'Like a team'

Ministers had been tasked with hammering out proposals on how to offset the economic impact of the pandemic, without giving political guidance on the matter.

The French and Germany ministers, Bruno Le Maire and Olaf Scholz called on all EU members "to rise to the exceptional challenges to reach an ambitious agreement" in a statement on Wednesday.

Italy's prime minister Giuseppe Conte meanwhile on Wednesday urged the EU to "think like a team".

The ball might be passed back to EU leaders to unblock disagreements over the ESM conditionality and the future recovery plan.

In the background, political populists are pressuring governments to harden their position.

In Italy, far-right opposition leader Matteo Salvini has targeted the ESM, tweeting that he doesn't trust loans coming from the EU and he does not want Italy to ask Berlin or Brussels for more money.

Italy wants to cast the debate as an issue of EU solidarity, and does not want to be seen as giving in to tough conditions demanded by Germany and the Netherlands.

EU leaders at odds on virus-hit economy

Italy, with the backing of France and Spain, call for substantial EU economic help, others want to see how long the outbreak will last before committing to big plans.

Analysis

How the EU's virus-alert agency failed

The European Centre for Disease Prevention and Control, an EU agency, was meant to highlight threats from infectious diseases, but painted a rosy picture of Covid-19.

News in Brief

  1. Poland accused of 'blatant violation' of EU court injunction
  2. EU concerned by US approach to Kosovo and Serbia
  3. City morgues cast doubt on Putin's virus data
  4. ECB increases pandemic stimulus to €1.35 trillion
  5. New EU cloud computing platform 'moonshot'
  6. City of Berlin passes anti-discrimination law
  7. Iran hits record corona cases in second wave
  8. EU job losses tell tale of pandemic damage

Feature

Why developing countries may be last to get the vaccine

'The current standard for vaccines is to be kept at two to eight degrees and that is really tough in many developing countries when it can be up to 50 degrees outside,' warn experts on the challenges facing low-income countries.

Stakeholders' Highlights

  1. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  2. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  3. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  4. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  5. UNESDACircularity works, let’s all give it a chance
  6. Nordic Council of MinistersNordic ministers call for post-corona synergies between economic recovery and green transition

Latest News

  1. EU warns UK to abide by Brexit political declaration
  2. Internal EU borders open by 15 June - bar V4, Portugal, Spain
  3. CAP 'failed to halt biodiversity loss', auditors find
  4. After Covid-19, deserted Venice struggles to survive
  5. Commission plans strategy to 'maximise' vaccine access
  6. How spies use women to steal EU secrets
  7. Hong Kong - when the Chinese Dream became a nightmare
  8. Right of reply: Letter from the Hungarian government

Join EUobserver

Support quality EU news

Join us