The Eurogroup lengthens, divided over the rescue fund and the Coronabonos

The Eurogroup still fails to reach an agreement on the economic response to the coronavirus crisis, after more than six hours of negotiation, due to differences over the use of the eurozone rescue fund and the possible issuance of mutual debt, the "coronabonos" , to finance the recovery.

The ministers of economy and finance of the eurozone, to which in this meeting are added those of the rest of the EU, began their meeting by videoconference at 16:00 (14:00 GMT) and made a break at 19:00 (17:00 GMT) which has been lengthening and will last, at least, until 23:00 (21:00 GMT).

The meeting could be prolonged at dawn to agree on the response to a crisis that will lead the bloc to recession, will trigger unemployment levels and threaten to widen the differences between the economies of the Union.

The recess is serving so that the ministers maintain bilateral contacts and try to outline a draft agreement, but for the moment the three pillars of the package of measures for almost half a trillion euros that the Eurogroup has been forging in recent weeks are still open, according to various sources consulted.

This involves the activation of a credit line for the pandemic by the European Stability Mechanism (ESM), the rescue fund; the mobilization of 200,000 million euros in loans from the European Investment Bank (EIB) and an anti-unemployment fund from the European Commission endowed with 100,000 million credits to finance schemes to reduce subsidized working hours.

The main point of friction, however, is the possibility of issuing mutual debt from the European Union, whether under the name of "coronabonos", "eurobonos" or another, as demanded by a dozen countries, including Spain, Italy and France, to finance the recovery.

France has proposed the creation of a temporary fund, outside the EU budgetary framework, with the capacity to issue debt backed by guarantees from the Member States, which would then be repaid through contributions from the countries or with a European "solidarity tax" .

The idea is rejected outright by Germany, the Netherlands, Austria or Finland, who oppose a tool that would imply that the EU as a whole assumes the risk of default on the debt of any of its members.

The third vice-president of the Spanish Government, Nadia Calviño, defended before the meeting that not only short-term liquidity measures can be adopted, but that the EU must start working now "on a mechanism that allows the pooling of debt" to finance the investments necessary for recovery.

Spain, he said, will defend that the conclusions of the Eurogroup reflect "a clear commitment" to transfer the heads of state and government that it is necessary to work "from now" on this mechanism.

An agreement on the recovery plan is not expected to emerge from the meeting, but the key is what contribution will be made ahead of the next leaders' summit.

The second main stumbling block is the conditionality associated with the credit line for the pandemic that the MEDE would launch, which could lend up to 240,000 million euros to countries that request it, some 28,000 million in the case of Spain, according to the figures spread by Germany.

The Netherlands is leading the opposition to soften the conditions of access to the MEDE credits, despite the general consensus that they should be lighter than in the bailouts managed by the financial crisis, where beneficiaries were required to adopt austerity measures or apply structural reforms.

Spain rejects the application of specific conditions on a case-by-case basis for countries requesting liquidity due to the pandemic and defends, in line with the position of the European Commission, that they limit themselves to using the funds for the response to the coronavirus and comply with the rules of discipline community prosecutor.

Italy, however, is more reluctant to the ESM, an instrument that in the country is very closely associated with the stigma of bailouts and the government considers it "inadequate", and is betting more strongly on "Coronabonos".


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