• Direct Coronavirus, latest news

If Spain overcomes its reluctance and the Government is willing to pay the political price of bearing the stigma of resorting to the Mede , the Eurozone Stability Mechanism that was created almost a decade ago to rescue countries, would save up to 2,000 million euros in interests .

The Eurogroup has approved in recent weeks a triple safety net of half a billion euros to provide liquidity to companies (through the European Investment Bank), to finance the cost of maintaining jobs (through the Sure mechanism of the European Commission ) and for the States, through the Mede. The mechanism created within the Luxembourg-based body is new, different from the past, and allows each country to request up to 2% of its Gross Domestic Product in credits with a maximum average maturity of 10 years. Without any macroeconomic conditionality , and only with the requirement to dedicate those resources to defray the "direct and indirect health expenditure" generated by the pandemic.

Economically the benefits are obvious, and the director of the Mede, Klaus Regling , has put figures on Tuesday in an interview with Efe and other European agencies. The Eurogroup agreed last week that these reinforced credit lines would have an opening cost of 0.25% and then a combined interest rate that is now only 0.115%, but that could rise a little later if the financing costs of the Mede himself came up.

With that price, well below what is now paid by a large part of the Member States in the market, Spain would save around 2,000 million euros, and Italy almost 7,000 million. Of course, according to the agreed conditions, our country will request the maximum, around 25,000 million euros. These are not insignificant amounts for those who could reach public debt levels of 113% and 159% this year , according to the latest forecasts by the European Commission.

Country reluctance

On April 22, the Treasury launched a 10-year syndicated issue. Demand was very high, more than 96,000 million, and managed to capture 15,000 million, but with a coupon of 1.25%. The profitability stood at 1.306%, equivalent to 17 basis points above the current 10-year benchmark, which expires in April 2030. These are not very high figures if a historical comparison is made. Last year, for example, there were issues at 1.45, but in January the Treasury had achieved a cost of just 0.5%, a third of what it is now.

"I will not make any recommendations to any country, but the facts are clear. All of our 19 member states will have very large fiscal deficits this year, so financing part of it safely, with low interest rates, could be attractive to many. countries, in particular because there is no conditionality, "Regling explained to Efe. "For half of our members there would be savings linked to a MEDE loan," added Regling, reiterating that the decision to apply for it is up to each government.

The Mede has a maximum credit rating , is guaranteeing funds from all Member States and has been enjoying more than favorable conditions in its emissions for years. Beyond the low cost, the agency reiterates that being a European institution, trust is paramount and that "it will not flee in the next crisis" nor will conditions change at any time.

But no one escapes that resorting to the Mede has a stigma, because it will speak of rescues, of national incapacity. European leaders have tried to take pressure off the instrument, reiterating that they have nothing to do with past aid programs, but it is complicated. There will be no Troika visits , there will not be a specific Memorandum of Understanding (MoU) for each country, but a generic template. And there is no type of obligation to make fiscal adjustments linked to these lines. But even so, Spain or Italy, which everyone considers the clearest candidates, continues to reiterate that they do not need it.

In accordance with the criteria of The Trust Project

Know more

  • Eurogroup
  • European Comission
  • economy

European Shock Plan The European Commission removes the Troika from the requirements of the Mede's emergency credit lines

PoliticsPedro Sánchez tries to quench the rebellion of the autonomies due to the de-escalation with 6,000 million "immediate" liquidity

PoliticsPedro Sánchez prolongs the state of alarm supported by the PP but with an increasingly hostile Congress