Eurozone can’t agree on new stimulus measures
EU finance ministers could not agree on large-scale support for their countries affected by coronavirus, discussion of the issue postponed until Thursday.
Diplomatic sources and officials said that disagreements between Italy and the Netherlands over what credit conditions should be provided to eurozone countries fighting the pandemic are blocking the process of providing countries with 0.5 trillion euros of aid..
«After 16 hours of discussions, we came close to an agreement, but we have not yet reached it, – said the chairman of the Eurogroup, Mario Centeno. – I have suspended the work of the Eurogroup and (we will continue) tomorrow».
Treasury ministers, who began talks on Tuesday that continued overnight with multiple interruptions to secure bilateral negotiations, are trying to agree on a package to help governments, companies and individuals.
They hope to agree on a half-trillion euros program to cushion the economic downturn and financial industry recovery from the pandemic, as well as forget about the divisions that soured relations as the bloc grapples with the global problem..
One diplomatic source told Reuters: «Italians want the mention of mutual debts as a possible collection instrument to be analyzed in the future. Dutch say «not».
The Hague was the only one to refuse to approve the text, which ministers had to agree on in order to receive a new set of economic measures from 27 national leaders of the bloc, according to the official who took part in the negotiations..
German Finance Minister Olaf Scholz tweeted: «In this difficult hour, Europe must stick together. Therefore, together with (French Finance Minister) Bruno Le Mer, I call on all euro countries not to abandon these difficult financial issues and to promote a compromise – for all citizens».
The issuance of joint bonds became a stumbling block between economically weak southern countries like Spain and Italy and the thrifty north, led by Germany and the Netherlands, when the financial crises in the eurozone began more than a decade ago..
To support economies saddled with the impact of the coronavirus epidemic, the EU has already suspended government aid limits and allowed member states to increase their debt to spend more..
But Spain, France and Italy say this is not enough, and see the discussion of greater support as a test of solidarity that could strengthen or destroy the EU..
Other proposals under discussion include lines of credit from the eurozone bailout fund, which will cost up to 2% of each country’s economic product, or 240 billion euros in total. The conditions for gaining access to this money remain a subject of discussion..
Providing the European Investment Bank with additional guarantees of 25 billion euros so that it can increase lending to companies by another 200 billion euros is another way to solve existing problems..
The third is to support the EU executive’s plan to bring € 100 billion to the market against € 25 billion of guarantees from all governments in the bloc to subsidize wages so that firms can cut working hours rather than fire people..
The creation of an emergency fund, granting grants for medical supplies and medical services is another idea, as is the French proposal to create a joint EU solidarity fund to finance long-term recovery..
If they finally agree, the combined pan-European and national government measures could constitute the world’s largest financial support program, surpassing that of the United States, Reuters calculations showed..
Discussion exposes divisions within the Euroblock and further undermines its unity, already damaged by the Eurozone crisis and the migration crisis of 2015-16, which contributed in part to Brexit.
Netherlands Minister of Finance on Wednesday morning Vopke Hoekstra stated that his country «was and remains against the idea of Eurobonds (an instrument that will unite European securities)».
«We think that this will create more problems than solutions for the EU. We would have to guarantee the debts of other countries, which is unwise», – the minister tweeted.
«Long delays and intense collisions neutralize any measures that are eventually agreed», – the bank economist said on Wednesday Berenberg Florian.
He warned that «In the long term, how the EU and the eurozone respond to the unprecedented emergency caused by the Covid-19 pandemic could shape attitudes towards European integration for decades to come».
Eurosceptic parties have reacted to persisting stalemate.
Matteo Salvini, head of the anti-European party "League" in Italy, said yesterday that he does not trust loans coming from the EU and does not want Italy to ask Berlin or Brussels for more money.
Meanwhile, in Germany «Alternative for Germany» (AfD), which first entered the German parliament in 2017, has opposed the coronavirus bonds, another plan to tackle the issue of a possible EU debt issue to fund some of the costs of the pandemic. AfD spokesman said neither coronavirus nor euro «do not justify the fact that German taxpayers pay the debts of the entire EU».
European ministers will meet again on Thursday to try to bridge these two differences.
EU leaders agree on $860bn joint-debt economic relief package