BRUSSELS: Finance ministers of EU fail to find themselves on the same page as the countries struggle to arrive at a plan to withstand the economic shock of the coronavirus outbreak on Tuesday. Germany is cautious about rewriting the rulebook.
As the COVID-19 throws the European economy into shocks and Italy, France and Spain look for a response from EU partners in guise of financial solidarity, Germany is reluctant to support changes in the rulebook.
Economy Minister of Spain, Nadia Calvino said that the EU will have to start working on a ‘Marshall Plan’ asap.
“A plan so that once the health crisis has been solved, Europe… can ensure that the economy recovers as robustly as possible, as soon as possible,” she said during video-link with other EU colleagues.
However, northern countries led by Berlin and Hague do not seem interested considering the huge stimulus announced by the European Central Bank is sufficient for now.
“Our aim is to add new lines of defence to the euro, preventing this economic crisis to morph into a financial one,” said Eurogroup chief Mario Centeno, whose is responsible to find a consensus in this situation.
“My aim is to report solutions to a leaders’ summit this Thursday, not curtailing any possible way forward,” added Centeno, who is also Portuguese finance minister.
At the heart of the split are deep doubts among the northern and wealthier European nations about the financial discipline of their southern partners, especially since the dark days of the eurozone debt crisis.
France, Spain and Italy have long advocated a eurobond, a joint borrowing by the 19 members of the euro single currency, and believe it could be the bedrock of a safer and more unified European economy.
France and Italy have again recommended a EU-wide corona-bond which was adamantly rejected by Germany calling it another Eurobond in disguise.
“I can only recommend that we don’t hold a mock debate for ideological reasons, in which everyone digs out their preferred solution from five or ten years ago,” German Economy Minister Peter Altmaier said in Berlin.
“It’s not about a fundamental change of strategy for ideological reasons, that would be wrong at this time and we won’t go along with it,” he added.
The ministers are now looking for a more precise approach to reach a eurozone bailout with an aim to support nations like Italy.
The European Stability Mechanism (ESM) has over 400 billion euros in firepower and could raise more. It is controlled by the 19 finance ministers from the euro single currency bloc. The body was formed with the primary purpose of rescuing countries that are shut out of the markets — which is not the case now.
But the ESM can also offer loan guarantees for countries that ask for it, though Italy, already under a pile of debt, is reluctant to do so, afraid of signalling to the markets it has money problems.
ESM programmes also come with demands to enact painful reforms, which Italy is reluctant to accept when what it actually wants is an act of friendship in a desperate moment.
If ministers agree to make ESM funds available, they will propose it to EU leaders who would take up the matter at a video-conference on Thursday.
A eurozone source said credit lines would likely be agreed in he end, but even that would be difficult.
“I don’t think we can agree today if you look at the mood between member states,” he added.