The Eurogroup agrees measures for half a trillion euros, but without crowns

The Eurogroup reached an agreement on Thursday to mobilize more than half a trillion euros in loans to help states, companies and workers affected by the coronavirus, but left the discussion on the issue of "coronabonos" to finance the recovery for later.

The president of the Eurogroup, Mário Centeno, assured at the end of the meeting by videoconference that it is an "ambitious" and "unthinkable response a few weeks ago", which reveals that "in the face of an enormous threat to our future, we are ready to bury our differences "

The ministers of Economy and Finance of the eurozone, joined by those of the rest of the partners of the European Union, resumed this Thursday the negotiation that they had to suspend on Wednesday due to lack of consensus after sixteen hours of discussion.

The meeting started late, but on the basis of a draft agreement developed in intense bilateral meetings, which started with the backing of France, Germany, Spain, Italy, the Netherlands and Rye, after having managed to iron out the differences between The Hague and Rome that blocked the previous meeting.

MEASUREMENTS

The agreement includes a package of short-term measures based on three pillars: a credit line from the European Stability Mechanism (ESM), the rescue fund, with € 240 billion in loans; a fund of the European Investment Bank with up to 200,000 million in loans for companies and a temporary fund against unemployment with 100,000 million.

The last stumbling block preventing an agreement was the conditions for accessing the ESM credits, as the Netherlands continued to demand that macroeconomic conditions, such as structural reforms, be imposed on the beneficiaries.

This constituted a red line for Spain and Italy, although the rest of the countries agreed with them that it did not make sense to impose conditions such as those of financial bailouts as it is a crisis for which no State is responsible.

Finally, the agreement establishes as conditions for accessing the line - which can lend each country up to 2% of its GDP - that the funds be used for direct or indirect health expenses due to the coronavirus, and that the countries then reinforce their economy, complying with community tax regulations.

The Netherlands has accepted a formulation that satisfies the countries of the South, although its Finance Minister, Wopke Hoekstra, pointed out on Twitter that if the funds are used for "economic support", not for health spending, it will be "with conditions".

On the other hand, the Eurogroup approved the "Sure" unemployment fund, which will have 100,000 million to give loans under favorable conditions to the countries, which will be able to use them to finance subsidized hours reduction schemes in order to avoid layoffs.

To avoid the reluctance of some countries that feared that this was the embryo of permanent European Unemployment Insurance, the agreement clarifies that it is an instrument for the duration of the pandemic and that it does not prejudge the discussion about permanent insurance.

They also gave the green light to the EIB fund, which will have 25,000 million in guarantees provided by member states to mobilize up to 200,000 million in loans to companies, including SMEs, affected by the pandemic.

RECOVERY FUND, BUT WITHOUT CORONABONO

The second focus of the Eurogroup debate was the recovery plan once the pandemic is over, and the troubled point, the possibility that it will be financed with the issuance of mutual debt of the Twenty-seven, the Coronabonds or Eurobonds.

A dozen countries, including Spain, France or Italy, demand the issuance of joint debt in the face of a crisis in which not all have the same margin for action.

On the contrary, Germany, the Netherlands, Austria or Finland reject a measure that would also mean jointly answering for the risk of non-payment.

Finally, the Eurogroup agreed to work on a temporary Recovery Fund, the amount of which was not specified, but left the decision on "its sources of financing and on innovative financial instruments" to the heads of state and government.

The agreement, therefore, makes no reference to debt mutualization, as claimed by Spain.

"Some member states believe that this (financing the fund) should be achieved with the issuance of common debt, other states say that alternatives must be found," Centeno said at the press conference after the meeting about a debate that remains. thus postponed until the next European summit.

Despite this, the third vice-president of the Spanish Government, Nadia Calviño, considered that a "good agreement" has been closed. "We will continue to work on common financing mechanisms for economic recovery," he said on Twitter.

The Commissioner for the Economy, Paolo Gentiloni, stressed that this recovery fund will be "crucial" to prevent the economic divergences in the Union from increasing as a consequence of the response to the crisis. "This would be a danger to our Union," he said.