Key EU states agree coronavirus economic rescue: diplomats

Marco Green
April 10, 2020

Finance Ministers have failed to reach an agreement on the economic response to the coronavirus pandemic, President of the Eurogroup Mario Centeno said.

"It's a big challenge to the existence of Europe", Italy's Prime Minister Giuseppe Conte told the BBC.

All data strongly indicates the economy in Europe is entering its biggest slump since World War II with everyday life and business effectively crashed to a halt.

A deal may still be possible on Thursday, said German Finance Minister Olaf Scholz.

But the Netherlands went further, with Finance Minister Wopke Hoekstra demanding "certain economic conditions", tailored to individual member states, sources said - a demand rejected by countries such as Italy in particular.

While the ministers sparred over more economic aid, the European Central Bank warned them that the bloc may need fiscal measures worth up to 1.5 trillion euros ($1.6 trillion) this year to tackle the economic free-fall caused by the COVID-19 epidemic, officials told Reuters.

"We're in complete agreement that we urgently need solidarity in Europe's, as some say, in Europe's most hard hour, if not the most hard - and that Germany is ready and obligated for this solidarity", German Chancellor Angela Merkel said before Thursday's call. "Germany and France are pushing for it".

"Our collective responsibility is to come to an agreement within 24 hours". But some of its elements have exposed deep divisions on sharing the financial burden of crises, evoking the bitter disputes and mistrust of the sovereign debt crisis of 2010-2012.

The proposed package includes a joint employment insurance fund worth 100 billion euros, a European Investment Bank instrument meant to supply 200 billion euros of liquidity to companies, as well as credit lines of up to 240 billion euros from the euro area's bailout fund to backstop states as they go on a spending spree to help economies back on their feet.

Italy was ready to accept a generic reference to the need to stick to European Union budget rules, but nothing more specific, they said, adding that with the uncertainty of the epidemic's effect on economies, it was impossible to design detailed criteria.

However Spain, France and Italy say that's not sufficient and have forged the dialogue about extra help as an existential take a look at of solidarity that might make or break the EU.

For businesses, the European Investment Bank proposed a 200-billion-euro guarantee to support ailing firms, especially small and medium-sized enterprises, according to the statement.

A separate plan to finance the recovery, after the epidemic, raises more questions. France and the southerners want the money - possibly up to three percent of European Union gross domestic product, or more than 400 billion euros ($437bn) - to be borrowed jointly on the market by all European Union states.

This is sometimes called "coronabonds" and Netherlands' opposition is shared by Germany, Austria, Finland, Sweden and others.

The ministers might end up sidestepping the problem by just mentioning the need for a recovery fund and asking the 27 national leaders of the bloc to decide on how to finance it.

Other reports by Click Lancashire

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