The Eurogroup prepares more than 400,000 million in loans to mitigate the impact of the coronavirus

The ministers of Economy and Finance of the euro zone (Eurogroup) are planning to approve on Tuesday a set of measures to alleviate the impact of the coronavirus pandemic that involves more than 400,000 million euros in loans through different institutions, such as the fund European bailout, the European Investment Bank (EIB) or the European Commission.

The heads of the bloc's economy have until the end of this week to transmit to the heads of state and government an urgent action plan that will help mitigate the consequences of the measures taken to combat the disease. After the deep division visible in previous meetings, the Eurogroup by videoconference on Tuesday will settle, except surprise, they are an agreement on a strategy based on three basic pillars.

The first of these will be access to € 240 billion in lines of credit from the European Stability Mechanism (ESM), the European bailout fund. This is an idea that Italy still rejects as "inadequate", in the words of Prime Minister Giuseppe Conte, but the open debate focuses on the conditionality that would accompany these loans.

The current lines of credit of the ESM are linked to the commitment to carry out macroeconomic reforms and the capitals are now discussing whether these conditions should be relaxed and limited to the fact that the loans received are dedicated to measures to face the pandemic. Germany has already agreed to minimize the requirements to access these credits and the question remains whether other countries, such as the Netherlands or Austria, will also accept it.

In fact, in a platform published in various media on Monday, the German foreign and finance ministers, Heiko Maas and Olaf Scholz, put at 28,000 million and 39,000 million the loans that Spain and Italy could receive, respectively, through the ESM.

The second protection shield would be the European Investment Bank's plan to create a "pan-European guarantee fund" of 25 billion in guarantees that will help mobilize up to 200 billion for the real economy. EIB President Werner Hoyer will present this measure to ministers, which would add to the 40 billion in guarantees that the entity already announced in March.

The third line of defense would be the 100,000 million euro anti-unemployment fund that the European Commission has proposed, especially designed for Spain and Italy, the two countries hit hardest by the pandemic so far.

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The three measures, however, represent lines of credit or loans that, albeit on favorable terms, Member States will have to repay. The possibility of joint debt issuance is not included among them. That is to say, the eurobonds that a dozen countries claim, including Spain and that continue to be the blocking point in the talks.

In recent days, voices have grown calling for the creation of a common fund to finance the economic recovery after the health emergency and through which European debt can be issued. For example, the French Government's original idea has been joined by political groups from the European Parliament such as the Social Democrats and environmentalists and two commissioners who, in their own right, have proposed a similar solution.

The Commissioner for the Economy, Paolo Gentiloni, and his colleague for the Internal Market, Thierry Breton, have proposed a European Recovery Fund that can issue long-term joint debt to boost economic recovery.

Any of these measures would represent the first mutual initiative to face the Covid-19 pandemic compared to all the previous ones, structured on the basis of loans. But in any case it would be a medium or long-term solution and, to get ahead, it would still need the approval of countries like the Netherlands, reluctant to share the risks with other partners.

The shock, therefore, will be at this point. Paris wants to condition the approval of the Eurogroup that, in addition to the three emergency response initiatives, the ministers also commit themselves to studying the temporary issuance of debt to finance a solidarity fund.

But, on the contrary, the Netherlands continues to refuse to mutualise risks through such a mechanism and criticizes the "ideological blockade of some" countries that want access to ESM funds "at very low and unconditional interests".