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  • EU: a broken Eurogroup passes the potato to the heads of government

Europe needs Eurobonds, or Coronabonds, and it needs them now. This is what is believed and requested by nine European prime ministers in a letter sent this Wednesday to the President of the European Council, Charles Michel, after the failed meeting of the Eurogroup on Tuesday afternoon.

Pedro Sánchez, Emmanuel Macron, Giuseppe Conte , the Belgian Sophie Wilmès, the Greek Kyriakos Mitsotakis, the Irish Leo Varadkar, the Luxembourger Xavier Bettel, the Portuguese António Costa, and the Slovenian Janez Jana warn that the devastating blow to health systems and economic demands "extraordinary measures to limit the damage and prepare the next steps", much more ambitious steps than seen so far.

"This global crisis requires a coordinated response at the European level. We need to recognize the gravity of the situation and the need for new measures to strengthen our economies today, in order to put them in the best conditions for a rapid recovery tomorrow. This requires the activation of all existing common fiscal instruments to support national efforts and ensure financial solidarity , especially within the eurozone. "

And among them, a mutualized bond that allows sending a message of unity, solidarity and coordination. We are not dealing with something asymmetric, they argue, produced by the weaknesses of an unreformed economy, but rather a symmetrical, exogenous ax, and it is not time for orthodoxy lessons or moral reproaches, as in the past.

"In particular, we must work on a common debt instrument issued by a European institution to raise funds in the market on the same basis and for the benefit of all Member States , thus ensuring stable long-term financing for the policies required to counter the damage caused by this pandemic, "says the letter. The first time that nine countries officially ask for a very controversial instrument, historically rejecting by Berlin or The Hague, and which still does not convince the most austere governments.

The signatories are only nine, not half of the Eurogroup and just a third of the entire EU . But they are among them the three largest community economies, after the German one. And the population of all of them, over 200 million people, is half of the entire Union.

Prime ministers do not specify how or in what quantity. There are different community institutions that can go to the market to ask for financing with which to later face the expenses generated by the pandemic. The European Commission has emergency mechanisms to request up to 60,000 million euros. The EIB, the European Investment Bank. And of course the Mede, the Eurozone rescue fund. They all have their pros and cons, technical or legal difficulties. But the mobilized governments believe that it is time to take the step since the European Central Bank not only supports but is encouraging it .

"Unprecedented Resources"

"Member States are called to play their part and ensure that as few people as possible lose their jobs due to temporary closures of entire sectors of the economy; that as few companies as possible fail , that liquidity continues to flow in the economy and banks to continue lending despite delays in payments and increased risks. All this requires unprecedented resources, "says the letter, noting that the ECB and the Commission have already done their part and that all the capitals are up to the task. "The ECB's monetary policy measures must be accompanied by equally bold fiscal policy decisions," they urge.

In the letter the deep divisions between the ministers of the Eurogroup come to light. The bond claimants reiterate that "the arguments for a common instrument are strong, as we all face a symmetrical external shock , for which no country is responsible , but whose negative consequences are borne by all." A reminder because the Netherlands is not really so clear. Not only because of health management, but because as his minister reproached on Monday at Ecofin, offending many colleagues, the southern cicadas did not seem to do their homework preparing fluffy fiscal mattresses while, once again, the northern ants were more cautious.

"We are collectively responsible for an effective and united European response. This common debt instrument must be of sufficient size and long maturity to be fully efficient and avoid risk of tipping now as in the future," replies the letter. It also opens the door to thoroughly reconsider the priorities of the Multiannual Financial Framework that has been negotiating for months and that is causing so many discrepancies.

"The funds raised [by the bond issue] will be used to finance in all Member States the necessary investments in the health system and temporary policies to protect our economies and our social model. In the same spirit of efficiency and solidarity, we could explore other tools such as specific funding for Corona-related spending in the EU Budget, at least for the years 2020 and 2021, beyond the announcements already made by the Commission, "Sánchez, Macron, Conte and the others point out.

"If we want tomorrow's Europe to live up to the aspirations of its past, we must act today and prepare for our common future. Let's open this debate now and move forward, without hesitation," concludes the message.

According to the criteria of The Trust Project

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