Recovery takes the Eurogroup's sleep

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In times of peace, the rhythms of the streets and those of the European institutions run distantly, but at least in parallel. In times of crisis, of chaos, the shape is more like a tangent that barely touches the curve of expectations. With thousands of deaths, hundreds of thousands of new unemployed, entire sectors closed without knowing when they will open and an unprecedented economic challenge, citizens expect a proportional reaction. They have heard their leaders of Eurobonds, of Coronabonos, of a Marshall Plan. Unprecedented mobilization at the community level and also immediately. Reality, unable to satisfy those ambitions, hits them like a slap in the face .

The heads of the Economy and Finance of the EU have met this Tuesday telematically for the third time in recent weeks. And the discussion continues with a view to dawn. After almost five hours, the Maltese minister, Edward Scicluna, was already venturing a bull run until dawn offering good clues of what was happening. "A marathon Eurogroup perhaps until the morning to agree on a robust four-pillar financial plan to support workers and companies during Covid19. And more importantly, to lay the foundation for a sustainable recovery."

In the choice of words and emphasis is the key. Take a good look at them. A plan for the emergency, something tangible for today, and a clear, agreed path for the difficult part, that of recovery. Ministers had long outlined a package, the broad outlines of which were well worked out: strengthened credit lines of up to € 250 billion for states using Mede, the eurozone bailout mechanism. Another 200,000 million in financing and liquidity for companies through the European Investment Bank. And another 100 billion, if necessary, for the workers . Through the Sure, the fund that the European Commission proposed last week so that the States can obtain loans quickly, advantageously and with almost no conditions to support employment, covering Erte and similar strategies. This, together with emergency mechanisms for health systems, is the initial phase.

Neither Eurobonds, nor Coronabonos nor a Marshall Plan. They are all of them, and some more , key elements of an open, deep discussion. But they were not directly on the agenda for the day, they are Phase 2. It has been spoken, of course, but not as the street thinks, because it was impossible to approve anything similar. All those involved know that there is no consensus for this, that much more technical, preparatory work and an approval from their bosses is needed, which is light years from now. The fight was for a role, for a few words and expressions .

The protagonists know that, in a way, nothing happens. Said so it can be confusing. It happens, of course it happens, the long-term joint response is a fundamental question, almost existential for Spain, Italy and to a lesser extent France. But there are two parts to the European strategy. The immediate one is that of rapid measures, those of liquidity, the constant flow of millions so that there are no chain bankruptcies, tens of millions of unemployed and an irreversible catastrophe. Minister Calviño calls it "a safety net" . Necessary, but not enough.

The second, for which there is a little more margin, is that of Reconstruction. That of recovering production levels, reviving activity, returning growth and facing deficits and debt levels that will inevitably skyrocket wildly. Perhaps temporarily only, but wild. States are addressing their situation at the national level. A symmetrical crisis but with obviously asymmetric effects, in terms of mortality and economic destruction. And now they can react, cover. The problem will come later, when the global scope is seen, the impact on public accounts and how long, measured in years or decades, not months, it takes to return to macroeconomic normality .

A solution that involves shooting up the indebtedness and vulnerability levels of the most indebted states is hardly going to be a solution for the EU as a whole. Hence the calls to the Marshall Plan, the Solidarity Fund that France has proposed . The Fund proposed by Commissioners Gentiloni or Breton. The special Mechanism that Spain mumbles but does not just present out loud. Or the use of the Multiannual Financial Framework that favors the President of the Commission, Ursula Von der Leyen and Merkel. Many options on the table. Some are joint debt issuance, Eurobonds in some way, total or partial. Others without it. Spain says it has no preference, as long as it is effective. But it seems much more logical for their interests, something very ambitious and not depending on the Financial Framework, for example, which in itself is the most impossible discussion within the EU.

This Eurogroup was very important on both legs. The Mede's safety net is everyone's favorite option, but nobody wants to use it. Italy is the only one, for internal reasons, that flatly refuses. It could end up doing like Spain, which tolerates it as an emergency measure, in case someone is left without access to the markets, but who does not even want to think about asking for it, due to the stigma it poses, political and financial. If you go to the Mede it is because investors are penalizing you face to face. So they contemplate creating the formula just in case, but only if there is also a commitment to joint debt of some kind.

The conditions

Then there are the problems of the conditions. The Netherlands and others want some form of conditionality, commitment, supervision in exchange for money. And in Rome it refuses, even if it is almost symbolic , to associate it with the European Semester and with commitments that all countries already make every year anyway. The same goes for the Sure, which the Hanseatics do not want to become a true embryo of European unemployment insurance with north-south transfers.

The second problem is transition. Since the Reconstruction phase is far away, but for Spain and Italy it is an essential part of this negotiation, how can the two sequences be linked? So the negotiation lasted this Tuesday. Because of the need to transfer in words, in a letter to the heads of state and government, an agreement thinking about the long term, with concrete mechanisms and not just vague promises. A text that is binding or at least in European language is solid and had to contemplate many subtleties, imperceptible from the outside.

In general, this type of meeting of the Eurogroup works as a Council of Ministers: the technical work is already done, through the secretaries of state, the directors of the Treasury, the ambassadors and advisers of ministries and embassies. The ministers argue, but it is above all political. There are no economics classes . Sometimes there is no agreement, they leave with nothing, but the normal thing is that they agree on at least some minimums. Although they have to stay until the next day, as in the great moments, with breaks so that they become bilateral or formulate compromise formulas.

Italy's bet

Italy is playing hard. It is the most pressing but in a way, with the buying umbrella of the ECB, it has some margin . Why sign something now only on the Mede and give up a solution on Eurobonds? Conte knows that they are eating it inside, but also that later his northern partners will not be in a hurry to move. Spain, sharing the principles, seems satisfied with the two-level formula, without the need to strain as much. Calviño believes that at the level of ministers, much more cannot be achieved and that the bosses are the ones who must take responsibility.

The European Parliament is complaining these days that its President, David Sassoli, has been left out of the negotiation of this package and of the measures in general. And he points to Berlin and The Hague, pointing out that the most conservative governments, politically and fiscally, did not want an Italian, and a socialist , close to the decision-making process, because they would not be objective and could be tempted to tip the balance towards the needs and preferences of their land. It is true that the European Parliament has never played a leading role in this type of process, unlike the other four great institutional presidents (Commission, Council, Eurogroup and ECB). Neither now nor in 2012 or 2015, when there was Martin Schulz, from the German SPD.

But it is also logical that Germany wants to avoid those suspicions. No one knows better than Angela Merkel how the personal and national factor can influence the design of solutions. This package that closed the Eurogroup has three legs: EIB, Mede and Commission. And, very opportunely, the three in charge of them are Germans: Werner Hoyer, Klaus Regling and Ursula von der Leyen. If a lesson remains from these days, from this new global threat, it is that if they want your voice to be heard, you have to do your homework, fix the roof, when there is sun. Raising your voice when it rains, if the pawns are not well placed, it is much more complicated.

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