EU finance ministers struggled early Wednesday to bridge differences on how to rebuild their economies after the coronavirus, with Germany refusing Italy’s call for unprecedented burden-sharing with hard-hit countries.
The European economy has been battered by the pandemic as countries impose strict lockdowns that have closed businesses and put normal life on hold. For weeks the EU’s 27 member states have bickered about ways to respond to the economic havoc, with Italy and Spain pleading for a solidarity fund that would be paid for by European partners jointly borrowing money on the markets.
Sometimes called “coronabonds”, this proposal has been firmly rejected by Germany, the Netherlands and other rich countries who see it as an attempt by the indebted south to unfairly take advantage of the north’s fiscal discipline. But after more than seven hours of talks that started on Tuesday and pushed past midnight, Italy was refusing to back down, calling for the eurozone’s wealthiest powers to move on their long-held red lines.
“Nothing is agreed at this stage. This will take time,” a European source said, adding that talks would go on through the night.
No business as usual
Berlin and its allies are insisting that the any European rescue should use the eurozone’s 410-billion-euro ($443 billion) bailout fund, as well as wait to see the effects of monetary stimulus already unleashed by the European Central Bank. Eurogroup chief Mario Centeno is tasked with finding a compromise in a fight that has taken an emotional turn. The virus has killed more than 50,000 people so far in Europe.
“We all know this is not time for business as usual policies. We must show our citizens that Europe protects them,” said Centeno, who is also Portugal’s finance minister. Ministers must “make a clear commitment for a coordinated and sizable recovery plan,” he said.
On Monday, German Chancellor Angela Merkel reiterated her government’s position in favour of activating the European Stability Mechanism (ESM) bailout fund to help countries that need it. But she pointedly did not mention shared borrowing such as coronabonds or Eurobonds, angering Rome.
“Eurobonds represent a serious response tailored to the crisis we are living through,” Italian Prime Minister Giuseppe Conte argued on Monday. Influential France backs Italy and Spain and insists the economic destruction caused by COVID-19 demands a new way of thinking in Europe, and wants member countries to help each other in unprecedented ways.
‘Debate will continue’
Italy is refusing recourse to the ESM, which was created in 2012 during the eurozone debt crisis when states like Greece no longer had access to borrowing on the markets.
Its programmes come with strings attached for countries that use it; heavy conditions that Italy and Spain say they would refuse if other capitals were to try to impose them after the virus. Northern countries insist that conditions can be held to a minimum given the cause of the crisis, but that in the longer term a country would have to get their finances in order.
Officials in Brussels had expected Germany and its allies to prevail on Tuesday, although ministers would not dismiss ideas such as coronabonds outright.“In the end, everyone will be able to say Eurobonds are still there. Or not. And the debate will continue,” one diplomat said, outlining an expected fudge at the end of the talks.
Whatever is agreed by the ministers will then go to EU leaders, who are expected to convene by video conference later in the month. Also under discussion is a lending facility from the European Investment Bank for struggling small- and medium-sized businesses, and a guarantee fund for certain national unemployment schemes to be run by the European Commission.
