After long and difficult negotiations, there is now a common European answer to the Corona economic crisis. Half a trillion euros are available. The debate over euro bonds should not be over.
In the fight against the corona economic crisis, the EU countries have put together an aid package of more than 500 billion euros for workers, companies and lurching states. The finance ministers reached agreement late in the evening after extremely lengthy and difficult negotiations.
Germany’s finance minister Olaf Scholz was satisfied. “Today is a big day of European solidarity and strength,” said the SPD politician in Berlin. Eurogroup leader Mario Centeno spoke of an unprecedented package against an unprecedented crisis. “This is a huge effort,” said the Portuguese finance minister. Judging from this, the agreement was quickly achieved.
The negotiations in various rounds, however, had taken three days. And in the end, important issues were postponed, including the question of joint borrowing via so-called corona bonds.
Three safety nets
The package now agreed contains three points – according to Centeno, a “safety net” for jobs, for small and medium-sized companies and for troubled states such as Italy or Spain, which are in debt anyway and are now also badly hit by the corona pandemic.
Precautionary credit lines from the ESM euro rescue fund of up to EUR 240 billion are planned to help states; a special loan program from the European Investment Bank (EIB) is planned to mobilize companies to mobilize € 200 billion; and workers will benefit from the short-term worker program “Sure” proposed by the EU Commission in the amount of 100 billion euros.
Controversial conditions
The conditions for access to the ESM credit lines, which can amount to up to two percent of the economic strength of the recipient country, were controversial until recently. The Netherlands originally wanted strict guidelines, but Italy and other countries refused. As a compromise, it has now been agreed that the ESM loans are not conditional, but that the money can only be used for direct and indirect health costs.
This agreement is perfectly clear, said Dutch finance minister Wopke Hoekstra in the evening. If money from the ESM is used for the economic consequences of the crisis, the usual strict reform commitments would have to be made. The Italian finance minister Roberto Gualtieri nevertheless celebrated the package as a great success for his government. The ESM program should be ready in two weeks, as ESM boss Klaus Regling said.
A new reconstruction fund
The ESM was founded in 2012 at the height of the euro debt crisis. Secured by deposits from the euro states, it borrows on the capital market and passes it on to certain states under certain conditions, which would have to pay higher interest rates on the market or would no longer be able to obtain credit. Now a new “recovery fund” is to be created to support the economic recovery. That is also part of the agreement.
However, the details are all open, including the sources of funding. Some countries want to issue community bonds for this, while others – including Germany – reject corona bonds. The Dutchman Hoekstra said that the text was deliberately vague – everyone could interpret it in their own way. But for him: “” Eurobonds are something that was wrong for me, is wrong and will never be okay. “
Support the German chancellor
Germany’s Chancellor Angela Merkel also rejected community bonds yesterday, but explicitly supported the rescue package with the three elements ESM, EIB and “Sure”. The three points totaled many billions, said the Chancellor. In addition, there must be an economic stimulus program for the economy and jobs after the crisis. “Germany will also participate in this,” she said. Discussions about the EU budget are now under a completely different guise.
Finance Minister Scholz emphasized that “three strong answers” have now been found to the crisis triggered by the corona pandemic. “It is about the health of citizens, it is about job security and it is about many companies remaining in this crisis,” he said.
French finance minister Bruno Le Maire also spoke on Twitter of an excellent compromise. The first reactions from other politicians were more subdued. EU Parliament President David Sassoli wrote on Twitter that the steps were in the right direction. The Green European politician Sven Giegold said that at least embarrassment had been avoided. “It was very important for Europe’s reputation that an agreement was reached in the last few meters.”
