Countries that wish to do so may request extraordinary credit lines from the European Stability Mechanism for an amount of up to 2% of their Gross Domestic Product, with average maturities of 10 years. At a rate of 0.115% interest for now and with an opening fee of 0.25%. There will be no conditionality, except the commitment to dedicate that money for "direct and indirect health expenses . " And there would be no Troika missions of any kind in every capital to call for reforms or to oversee public accounts. This was agreed this Friday by the Eurogroup after one of its shortest meetings since the start of the Coronavirus.

Finance ministers have done their best to try to remove the stigma that Mede's aid programs carry. They want to make it clear that it is not a rescue like the ones that were seen between 2010 and 2012, and that is why the idea that there is no conditionality beyond the fate of money is stated several times in their statement and has been repeated by all the protagonists to the end. .

"There is no stigma for any country, everyone can ask for it, they are standard conditions, there is no Troika and it is very important to highlight it," Mario Centeno said this afternoon. There are no macroeconomic adjustments, there is no need to consult legislative changes. There are no 'men in black' permanently. This is something else and everyone agrees on it, even the most orthodox. In addition, so that no one can be pointed at, there will be a standard template to proceed in all cases, and not a specific Memorandum of Understanding, as until now. Something that the hawks recently considered unacceptable and Mede himself viewed with suspicion.

Mede loans have prevalence, a preferential status, so a country in distress must return this money before that of other potential creditors, but it is not something specific to these reinforced lines, but is in the Treaty of creation of the Mechanism . It is the same in other institutions, and so for example the IMF has an even greater preference.

SPAIN

This Friday, Mario Centeno; the Commissioner for Economic Affairs, Paolo Gentiloni; and even ministers like the Dutch Wopke Hoekstra have insisted that it is now up to each Executive to decide whether access to funds at a cost far below the market, even when everyone has very easy access now, compensates them for the political criticism that it will certainly take. Spain could choose more than 24,000 million euros, and Italy over 30,000, according to the benchmarks to be used, at the end of 2019.

The lines will be available until the end of 2022 and the Mede board of governors will study and approve each case that arises. The initial objective is for the lines to have an initial 'commitment charge' of 0.25% and a price formed by the base rate at which the Mede is financed (now around 0.1%, but which could grow by e future) plus a margin of 0.1% and a maintenance cost of 0.05%

The format envisaged is that if a country requests the line, the procedures would start and then there would be disbursements by sections, as justified by the items of expenses to which the money would be dedicated. There would be reviews by Mede himself and a series of documents will be published establishing the general categories in mind for the idea of ​​"direct and indirect expenses".

"It will be seen in detail when a country asks for it," explain sources from the Ministry of Economy, "but then it is true that when you receive loans, the money enters the common fund. In the 'reporting' it will be necessary to justify that with the disbursements you are making the expected expenses. As you make requests, you would have to justify the items and before proceeding with disbursements, justify that you have made those expenses. That you have paid payrolls or masks or transfers to the CCAA for health expenses ·, the same sources continue .

INDIRECT EXPENSES

The battle will be where it fits and does not fit within the concept of "indirect costs", beyond the most obvious medical equipment. Some governments may try to stretch the margin, with all the creativity imaginable. But the feeling among the ministers is that the rules of the game "are totally clear," says the Dutchman to questions from this newspaper. And that the Mede, which if with the German Klaus Regling at the head for something is characterized by its lack of flexibility, will not allow accounting virguerías.

The purpose from day one has been to create a much more flexible mechanism than previous ones. The institutions have produced a report on debt sustainability, financing needs, financial stability risks, as well as on the eligibility criteria for accessing this instrument for all potential stakeholders. "We agree with the view of the institutions that all ESM members meet the eligibility requirements for support under the Pandemic Crisis Support," says the statement approved today.

There are reasonable doubts in Brussels about the benevolence and optimism of any of these analyzes. The Spring Macroeconomic Forecasts, presented this week, anticipate that the Spanish one, for example, will rise to 115.6% of GDP this year and to 113.7% next year , an increase of 20 points from the closing in 95% of GDP in 2019. Similarly, Greek debt would soar to 196.4% of GDP this year, from Italian to 158.9%, from Portuguese to 131.6% and from Cyprus, France and Belgium to around the 113-115% also, leaving the Eurozone average at 102.7%.

But there is a green light, and if next day the Board of Governors of the Mede does not put any more impediments, and the processing procedures of some national parliaments do not delay it, the help lines of the mede, but also those of the reinsurance program of Unemployment (Sure) and the liquidity of the European Investment Bank, would be available from June 1, as desired.

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  • Eurogroup
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  • Coronavirus
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  • Unemployment

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