Eurogroup: agreement of the 27 on a common economic response to the coronavirus

European finance ministers reached agreement on Thursday April 9 on a joint economic response to the coronavirus pandemic. The 27 have found common ground with the Netherlands, which has blocked talks since Tuesday.

Excellent agreement between European finance ministers on the economic response to #Coronavirus: 500 billion euros available immediately. A stimulus fund to come. Europe decides and is up to the seriousness of the crisis.

"The meeting ended with the applause of the ministers," the spokesperson for the president of the Eurogroup announced on Twitter. French Minister of Finance Bruno Le Maire welcomed an "excellent agreement" including "500 billion euros available immediately" and "a stimulus fund to come".

This consensus is a relief for Europeans who manage to display unity in the face of the disastrous economic consequences of the virus, after weeks of procrastination highlighting a divide between the countries of the North and those of the South.

The burning question of unresolved "coronabonds"

Faced with the pandemic, the European response must focus on three main areas: up to € 240 billion in loans from the euro zone relief fund, a guarantee fund of € 200 billion for businesses and up to 100 billion to support partial unemployment.

The burning issue of "coronabonds", intended to support the economy in the longer term after the crisis, considered less urgent, was not resolved on Thursday.

The heads of state and government, who themselves had failed to reach an agreement at a summit on March 26, will still have to validate these proposals.

A unitary response was all the more essential since the European economy is heading towards a deep recession in 2020, the International Monetary Fund even believing that the coronavirus could cause worldwide "the worst economic consequences since the Great Depression" of 1929.

Bilateral contacts had multiplied for two days, with the "will to reach a compromise before the meeting" by videoconference, initially scheduled at 5 p.m. (3 p.m. GMT), but which did not start until 9 p.m. 30 (7:30 p.m.).

Wednesday morning, after sixteen hours of sterile discussions, The Hague had been unanimously criticized for its inflexibility, a blockage qualified by Paris as "counterproductive" and "incomprehensible".

Stimulus fund

Member States criticized the Netherlands (supported, according to a European source, by Austria, Sweden and Denmark) for blocking the activation of the European Stability Mechanism (ESM), by strictly conditioning the loans that could be granted by this euro zone relief fund for economic reforms.

Such "conditionality", which would go back to the time when Greece was forced to implement sometimes painful reforms in exchange for new money, would have been experienced as a humiliation by Italy and Spain, both European countries currently most affected by the epidemic.

Created in 2012 during the debt crisis and financed by the Member States, the ESM could lend to the States up to 2% of their GDP, or up to 240 billion euros for the whole of the euro zone.

The countries most affected by the virus, in particular Italy, are calling for the creation of a stimulus "fund" which can be financed by common debt, in the form of eurobonds sometimes called "coronabonds" or "eurobonds".

Among these countries are also Spain and France, as well as Greece, Malta, Luxembourg or Ireland, according to concordant sources. However, the pooling of debts constitutes a red line for Berlin and The Hague, which refuse to be part of a common approach with the highly indebted States of the South, considered lax in their management.

The final text mentions a "stimulus fund" of which "the legal and practical aspects", in particular the "financing" will still have to be defined.

The other two axes of response of Europeans to the virus were more consensual: a guarantee fund of the European Investment Bank (EIB) allowing to mobilize up to 200 billion euros for companies and a guarantee of 100 billion maximum of the European Commission to support national partial unemployment plans.

With AFP and Reuters

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