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EU finance ministers are meeting via teleconference on Tuesday to try to finalize the first major package of measures at the 27 level against the destructive effects on the coronavirus economy. After the fiasco just a few weeks ago, the pressure to reach an agreement is immense , but the positions are still very much at odds. The general lines, at this point, are quite clear. Nothing creative, unexpected, groundbreaking. The available means will be used, twisting them as much as possible. " There is a lot of scope for solidarity within existing instruments and institutions . We have to fully exploit these tools and remain open to doing more. A solid package is being created," the Presidents of the Commission, the Council and the Eurogroup in a joint statement.

The main instrument would be the Mede , the bailout mechanism created during the Eurozone crisis. That it can give reinforced lines of credit (ECCL) for up to 410,000 million euros, and that according to Mario Centeno will have a first line of defense of 240,000 million. The key is in exchange for what and if Italy will end up accepting it .

The rescue programs that the Mede granted last decade, including Spain, contemplate a Memorandum of Understanding, missions of the former Troika , very marked fiscal objectives from Brussels and consultations before each legislative decision. There is absolute consensus this time that the conditionality of these emergency lines has to be very different , smoother, but there is still no agreement on where to put the limit.

Italy and Spain require that you have no conditionality. For the Netherlands, it is incomprehensible and almost offensive that the Mede should be used as a source of "cheap loans" without some kind of consideration. The South wants immediate money and perhaps even above 2% of the GDP that is being studied at the maximum per country. But the hardest (with Austria and Finland in the group) say not to speak, and that the more ambitious, the more you have to demand in advance. The rhetoric of the ministers and their teams is quite strong, showing significant discrepancies, but from the institution they estimate that there is understanding in 95% of the content and that there is only 5% of the way to go. The hardest, but less than the last time.

Conditions in two phases

In The Hague, for example, they propose a two-phase mechanism. A first without demands and quick disbursements to deal with the pandemic, but then a second with goals, reforms that foster growth and some oversight . The passage from one to the other could perhaps be set when the medical pandemic ends, when the borders are reopened or with other clauses.

The battle is very open. Spain seems reasonably optimistic. That the 'contract' in exchange for highly advantageous loans implies committing to follow the lines of the so-called European Semester , and the so-called Country Specific Recommendations , which are published every year and are in any case on the table, does not seem crazy . The Eurogroup promises that "tailored suits" would be made, since legally you cannot avoid a document nor can you use the same pattern for all those who need assistance, and there is CJEU jurisprudence on this matter.

It would be a way to reassure the hawks and it can be argued that making reforms and complying with the recommendations is, of course, the will of each capital and always has been. And then make a more or less real case, as it has been going for decades. Guarantee that the money will be used well, to promote growth, and will not be 'wasted', as they fear in the north. If it were simply that and the disbursements were immediate and not subject to the fulfillment of precise fiscal and legislative objectives, it would be assumed. The political damage, the stigma of the 'rescue', will be harsh, but it would not resemble what was signed in 2012 .

In any case, the low profile is surprising. For two weeks, the so-called non papers , position papers and ideas from the countries have been raining down. Germany, France, the Netherlands. A clash of ideas at the highest level in the EU, red lines that circulate, leak, are also debated between academics and journalists, between lobbyists and officials. Spain, once again, flies voluntarily under the radar. Constantly in contact, in negotiations with all parties, but avoiding publicizing their position , their demands, their alternatives. Always aspiring to be what is known as an honest broker , mediator, facilitator of consensus. Difficult in general conditions, risky when there is so much at stake and you are one of the most affected. The Government, when asked, estimates that its interests are defined in the President's speeches and public appearances. A defeat by failure to appear. Other.

Maximum voltage in Italy

However, in Italy the tension is already explosive. For political reasons prior to the virus, the very idea of ​​the Mede is toxic, to the point of getting into the hands of Parliament. The Law of Matteo Salvini has been using it for months against the Government, making recourse to these lines with conditions the Government can take ahead. That is why Giuseppe Conte's position is fragile, unstable and changeable. Everything hangs on a fine thread and any oscillation of the rest of the package was ruining it.

On Monday afternoon, before the cameras, Conte turned again, making any progress difficult. "The Mede, no. Eurobonds, surely yes. The Mede we have repeated that it is an absolutely inadequate instrument. Eurobonds, on the other hand, are a serious response, a solution, effective and adequate to the emergency we are experiencing," he said.

From Rome they press their partners saying that they can only accept this package if there is no obligation for macroeconomic adjustment and if they are also clearly included in the statement of the ministers to their heads of government and state (who are the ones who must give the go-ahead) last) references to a possible joint debt issue in the EU at some point . Either Eurobonds, or a Recovery Fund as suggested by France or the Commission, with its own and joint debt capacity.

Last week, the Eurogroup's shopping list included an option within the Quick Financing Mede itself, with up to 80,000 million euros, but the sources consulted say that the idea is good but requires more work, so it probably won't be. part of the immediate package.

The package has another series of equally delicate elements. On the one hand, the use of the European Investment Bank and its Pan-European Guarantee Fund, which could have up to 200,000 million loan capacity , backed by 25,000 million in guarantees from member states. The proposal took shape last week only, so concrete implementation details are missing. But a priori there is broad support at the general level.

The third leg is the so-called Sure, the reinsurance mechanism introduced by Ursula von der Leyen last week. A fund for the Commission to go to market, and with endorsements of unused Funds and guarantees also from the countries, can raise up to 100,000 million in these lines with hardly any conditionality to the partners most affected by unemployment. They want maximum liquidity for companies to keep jobs, even if public debt soars. There is some consensus too, but the Netherlands insists that it be made very clear that it is a very short-term program with specific objectives. And others, on the other hand, want it not to have such a fast expiration date.

The fourth element is emergency initiatives. There is no need to create anything new, because there is an Instrument that has already been used on other occasions and it would be enough to refocus it. The Commission, digging through all the remnants of the Multiannual Financial Framework, has proposed € 2.7 billion. Mark Rutte last week suggested a Fund with up to $ 10 billion to $ 20 billion in voluntary contributions to help the worst-affected countries in health, with medical supplies and for hospitals. New resources, a "gift" and not a loan.

The Eurogroup believes that perhaps the two ideas could be merged. The Dutch proposal is more ambitious, but making contributions through an Intergovernmental Agreement (IGA) is slow and requires national parliaments. Perhaps the structure of the Commission and the Multiannual Financial Framework (the EU Budget) could be used, which allows for quick voluntary contributions.

A plan and a Reconstruction Fund

Finally, another of the Gordian knots. The Commission promises to review the Financial Framework to adapt it to this challenge and with "investment levels never seen before". Spain wants a Marshall Plan for reconstruction. Commissioners Gentiloni and Breton proposed something similar, a Fund with the capacity to issue term debt, for recovery yesterday in this newspaper. And France has articulated the best idea, offering a Solidarity Fund , which would be renamed towards Recovery, and that would be an intermediate step. Not Eurobonds exactly, but an embryo. Something that Germany rejects fully.

It is still a very politically sensitive issue in some capitals and the consensus in the question sources is that clearly more work is needed to see a concrete proposal. References are expected in the document or the ministers' statement, but with little specificity. And precisely on how all the factors are linked depends on the final agreement. Nothing is closed until everything is closed . And as the head of the Mede, Klaus Regling, warns, in a tribune published these days, using new instruments is very slow and tiring. In the 2010 crisis, it took the Financial Stability Fund seven months to issue its first bond in the markets, and it was done as quickly as possible. Today there is no such margin.

Despite the discrepancies, there is some confidence that the Eurogroup will come up with a plan by consensus that will be passed on to the leaders, who do not have a date for their next remote Summit. With more vague and open language in the most controversial parts, but that includes all the claims. Both due to the conditionality of the loans, which both opposing blocks define as "ideological blocks ", and the ambition necessary in the "reconstruction" phase. At the end and after the usual dynamic is that: crisis, shock, chaos, tears and a decision 'suboptimal for all. However, what is at stake goes beyond macro figures. The pandemic is touching very different fibers and the reactions cannot be underestimated. And the consequences. At the last European Council, Spain and Italy stood. And seeing what Conte says, it could perfectly happen again . Being precisely the most needy.

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