The broken Eurogroup passes the ball to the heads of government

EU finance and economy ministers pass the hot potato to their bosses. The coronavirus hit for the world economy is going to be devastating, but members of the Eurogroup are unable to agree on what the reaction should be. Neither the instruments, nor the amount nor the exact ambition. Like a decade ago, during the debt and financial crisis, partners are divided into blocks with often irreconcilable ideas.

Some speak of a Marshall Plan and others believe that increasing spending at the national level for a time is enough. Some want eurobonds or coronabonds, and the others keep warning of the "moral hazard" of mutualization. Some call for an unprecedented fiscal effort through community mechanisms, such as the Mede, and without attached conditions, and the habitual suspects in the north refuse outright.

We know the work perfectly. The actors, the script and the scenery. There is talk of a joint response, a joint response is expected and a joint response is needed, but it has not just arrived. As the division is too strong between subordinates - who on Tuesday were not even able to reach a consensus on one of their vague communiqués full of good words - it is the leaders who must now make a decision.

Something that in normal conditions, in person, with their teams and a sleepless night, is difficult, but now it seems even more so in teleconferences. Sometimes in the EU it is better not to have an agreement than a minimum or really bad one that is useless. But if the current pressure does not succeed in unlocking the situation soon, the damage will again be very serious for the reputation of the institutions and the trust of the citizens.

Stability Pact

On Monday, Ecofin agreed to approve the temporary cryogenization of the Stability and Growth Pact. And on Tuesday the ministers put on the table a wide battery of measures. Neither Spain nor France, two of those who most advocate the idea, gave too much war either for Eurobonds or a specific issue of coronabonds. Germany and the Netherlands, among others, are extremely hot and the urgency is so great that more realistic ways must be found in the short term. But it is one thing to yield, as always, and another to repeat historical errors in dramatic moments.

The thesis more or less promoted from the south is that a crash plan is needed now and then a reconstruction plan, what Madrid calls Marshall. With a huge amount of millions in investment. For the first phase, the more or less generalized conclusion is that the European Commission, the European Investment Bank and the Mede (the Eurozone bailout fund) should put their resources to work, including the possibility for everyone to go to markets and finance spending against the pandemic. But from there, the shock.

"Good starting point for the European Council on Thursday," said Frenchman Bruno Le Maire, concluding that a consensus on the Mede is beginning to be formalized, in the form of bailouts. Something he himself had asked for hours before urgently. "Wide support" for the use of credit lines confirmed the Portuguese Mario Centeno, pointing to a figure of perhaps 2% of the GDP of the member states as a 'benchmark', as a reference. "It has to be only ultimately," chilled the main hawk, the Dutchman Wopke Hoekstra.

The problem is not just the instrument, but everything that goes with it. Neither Nadia Calviño nor the Italian Gualtieri are willing in the usual way, a request for assistance with a Memorandum of Understanding, as happened a few years ago. They don't even want to hear about ransoms. The hawks, on the other hand, continue defending the benefits of structural reforms and censuring those who, with several years of very solid growth, have not created mattresses for adverse situations.

Liquidity

The most affected governments demand a fiscal bazooka, but they are willing to accept, temporarily, the creation of a new fund within the Mede that can offer liquidity. Minister Calviño assured before the meeting that she did not see that "no country has a need to access Mede instruments. All countries have access to financial markets and the action of the ECB eliminates any doubt in this regard.

The debt markets are stable and no country needs access, "he said, referring to the traditional method of bailouts. " Spain does not plan at this time to activate any extraordinary mechanism, we are in a positive financial situation, today we have sold a syndicated bond At 7 years with over-demand of more than triple what is expected to be placed and at favorable prices. It is not an option that we consider. But it could be a transitory instrument that begins to visualize the response, which must be something structural for Europe to respond in solidarity, "added the vice president.

The message about the new background being shuffled is complicated. The Spanish Government does not oppose the so-called ECCL, reinforced lines, it accepts it, as long as it is clear that it is merely temporary until it has a much stronger recipe. And as long as it has minimal and highly focused conditions and it is assumed that it is an instrument of containment, a deterrent. A safety net that may not be necessary. "What is being proposed and working with the Mede is to create a special financing line, linked to the coronavirus, that has conditionality with the use of funds for the coronavirus and that can be a liquidity network if any Member State prefers to access liquidity of the Mede.

A precautionary line, not for immediate access. And that there was a joint request or a group of countries to have availability, nothing has been decided but it is what we will discuss this afternoon, "said the Spanish.

The stigma of asking for help

Nobody escapes, even if some want to lower it, that asking for help is a stigma. That is why the most supportive, think the most affected, is that everyone asked for it en bloc, sending many positive signals. But there is a lot of resistance and there may be a broad block, but not unanimity.

The ball is held by the heads of state and government this Thursday. The ambassadors are already working on drafts of the conclusions document. "There is still more work to do," acknowledged the president of the Eurogroup, Mario Centeno. There are two days, which in community terms is a lifetime, but the margins are very narrow. There will be something, it is almost certain, but not enough. It is a first step, but the following ones are under a lot of pressure.

"We know perfectly well that we have inherited different visions and divisions from the previous crisis, but I am confident that this will allow us to overcome it. What we have done in recent weeks shows that it is possible," said Commissioner Paolo Gentiloni. Perhaps Pedro Sánchez and Giuseeppe can learn to say it in Dutch. His ministers stood today, Thursday it is their turn.

According to the criteria of The Trust Project

• Eurogroup
• Spain
• GDP
• Pedro Sánchez
• European Comission
• Germany
• Europe
• France
• Madrid
• Nadia Calviño
• Coronavirus
• Covid 19

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