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After several weeks of push and pull, the offer begins to be defined. The European technicians have on the table a draft with the proposal so that the countries most affected by the coronavirus crisis, Spain and Italy, can use the Mede, the eurozone rescue fund, to obtain tens of billions of euros in lines of credit.

It would be the first line of defense, but not the only or the last. The mobilization of billions of euros of structural and cohesion funds has already been approved at the community level, the Stability Pact has been frozen, activating the emergency clauses to suspend conflicts over illegal state aid to sectors in distress. And outlined the Sure, an unemployment reinsurance mechanism for the 27. And now, the Eurogroup hopes to reach consensus for the Mede to launch lines of credit, with similarities to the bailouts of the past decade, but with much less conditionality. This is shown by the documents obtained by the newspaper El País.

The Mede has a firepower of up to 410,000 million euros. It makes money by going out to the markets and, according to its Treaty, grants aid programs to a Member State, as long as it signs a Memorandum of Understanding. The programs, or bailouts, have included in previous cases very severe macroeconomic adjustment programs, with missions by the men in black, formerly known as the Troika. No country wants that stigma. Spain, if using this modality, would be the only country to need it twice. Italy did not come in the past, but right now it has a major political problem, because the Mede is toxic. For months, and for reasons beyond the control of the virus, Matteo Salvini's Lega and the Cinque Stelle Movement have made it a reviled, dangerous instrument associated with the loss of sovereignty. A large parliamentary majority rejects it and Giuseppe Conte has sent opposite messages over and over again in the past few weeks. Forcing even the European Council to withdraw the mention of the mechanism from the conclusions document, as an exit option. Or as the main option.

What is valued now is different. A much lighter conditionality, associated only with allocating funds to the fight against the virus. Without macro program. But that would require, at least according to the current draft, some oversight. The credit lines could amount to 2% of GDP, the magic number that has been used for weeks in Brussels, calculating that it is approximately what countries on average are having to dedicate to face the economic consequences. But adjustable according to country specific needs. That would mean about 25,000 million euros for Spain, at least.

The Commission has launched the reinsurance program and is studying how to offer advantageous loans to those who will suffer in the public accounts the blow of the automatic stabilizers.

A few days ago, Vice President Nadia Calviño assured that Mede's credit lines were not a sufficient solution. That they could be something viable, to consider, but that was not enough. However, in the Eurogroup it is the solution that generates the most consensus , as Mario Centeno, its president, admitted last week.

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  • Spain
  • Italy
  • Eurogroup
  • GDP
  • Nadia Calviño
  • Coronavirus
  • Covid 19

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