French Economy Minister Bruno Le Maire said of the EU talks on Twitter: "Europe has decided and is ready to meet the gravity of the crisis."
Brussels, Belgium - Finance ministers hope the package will help reduce economic pain across the 27-nation bloc, especially hardest-hit Italy and Spain.
Published: Fri 10 Apr 2020, 3:03 AM
Last updated: Thu 6 Aug 2020, 6:27 PM
EU finance ministers agreed a 500-billion-euro (Dh2 trillion) rescue Thursday for European countries hit hard by the coronavirus epidemic, but put aside demands from Italy and France for pooled borrowing.
The breakthrough came after the Netherlands softened its position on the crucial question of making needy countries commit to economic reform and outside oversight in return for assistance.
The Hague had blocked the talks two days earlier by insisting that Italy, or any other country in need, deliver on governance targets -- which Rome saw as a shocking demand during a health crisis.
"Today we answered our citizens call for a Europe that protects," Eurogroup chief Mario Centeno said after the talks.
"This response contains bold and ambitious proposals that didn't seem possible just weeks ago," added Centeno, who is also Portuguese finance minister.
As a compromise, the final statement clearly states that the rescue would be specifically earmarked for costs related to the Covid-19 crisis, which has killed more than 65,000 people in Europe.
The ministers, however, set to one side a proposal from Italy, Spain, and France for a joint borrowing instrument, sometimes dubbed a "coronabond", that would have raised money towards a recovery after the outbreak.
Germany, the EU's most powerful member, has refused the pooled debt proposal and ministers agreed only to "explore" the idea under the direction of EU leaders, who are set to meet later in the month.
The package agreed is worth about 500 billion euros (Dh2 trillion), short of what many observers believe is necessary to restart the European economy when the health crisis recedes.
Data indicate that the economy across the continent is already in a historic meltdown, with everyday life paralysed to fight the spread of the virus.
Despite 19 EU countries sharing a common currency, member states have reacted unilaterally to save their economies, giving richer countries such as Germany a big advantage over those with less spending power.
- 'Fair and reasonable' -
The main component of the rescue plan involves the European Stability Mechanism, the EU's bailout fund which would make roughly 240 billion euros available to guarantee spending by indebted countries under pressure.
Italy and Spain had the backing of the majority of member states to keep the conditions for tapping the European Stablity Mechanism (ESM) to an absolute minimum, but the Netherlands fought hard for something tougher.
Putting conditions on support is seen as a humiliation in Rome and Madrid, evoking bad memories of the eurozone debt crisis when auditors from Brussels dictated policy to bailed out Greece, Portugal and Ireland.
Dutch Finance Minister Wopke Hoekstra insisted if a country asked for any non-virus related support from the ESM -- it would still come with conditions.
"That's fair and reasonable," he tweeted.
- Coronabonds 'implied' -
However, the mutualisation of debts was a bridge too far for Berlin and The Hague, which refuse to take on joint loans with highly indebted states such as Italy, France or Spain which they consider too lax in their public spending.
French Finance Minister Bruno Le Maire said the debate was still open and that everyone agreed that new sources of funding were necessary to restart the economy.
"Common debt... is not said, but it is implied," he said.
But, repeating her well-known position, German Chancellor Angela Merkel had earlier on Thursday firmly rejected the notion of pooled debt in Europe.
"I don't believe we should have joint liability (shared debt) in the (EU) in its current form, and that's why we reject that," she said.
In addition to the eurozone rescue fund, the EU ministers agreed 200 billion euros (Dh803 billion) in guarantees from the European Investment Bank (EIB) and a European Commission project for national short-time working schemes.
"Europe has decided and is ready to meet the gravity of the crisis," French Finance Minister Bruno Le Maire tweeted after the talks.
He warned earlier in the day that France's economy is expected to shrink six per cent this year, even with the country's own 100-billion-euro relief plan.
"Today we answered our citizens' call for a Europe that protects," Eurogroup chief Mario Centeno said after the talks.
"This response contains bold and ambitious proposals that didn't seem possible just weeks ago," added Centeno, who is also Portuguese finance minister.
Both workers and companies are suffering as half the planet is being told to stay at home.
- Worst 'since Great Depression' -
The International Monetary Fund said that 170 of its 180 members would see declines in per capita income this year -- just a few months after predictions that nearly all would enjoy growth.
"We anticipate the worst economic fallout since the Great Depression," said IMF chief Kristalina Georgieva, urging governments to provide lifelines to businesses and households alike.
And even in the best-case scenario, the IMF expects only a "partial recovery" in 2021, assuming the virus that has infected more than 1.5 million people subsides this year.
"It could get worse," Georgieva warned.
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