The ministers of Economy and Finance of the Twenty-seven met yesterday telematically with the aim of giving an answer to the damage caused by the coronavirus in the European economy. As the main item on the menu, the foreign ministries discussed the possible use of the European rescue fund (ESM) to help countries in distress through lines of credit and even joint debt issuance as a way to share risks, the baptized as coronabonos.
As stressed by the President of the Eurogroup, Mario Centeno, We are only at the beginning of the debate, but the states are exploring the option that this fund can help all European countries. that they need it through a precautionary line that is not subject to the same conditions demanded during the bailouts of the debt crisis. Countries with problems could request an amount that represents 2% of their GDP, an amount that could be higher in certain especially severe circumstances. As Centeno emphasized “the current challenges are in no way similar to those of previous crises” since we are facing a symmetrical shock that affects all countries equally and therefore there is no sense in talking about “moral hazard”, the expression used by Northern hawks to define alleged irresponsible behavior in Southern countries. The Heads of State and Government of the Twenty-seven will continue to debate this issue at the videoconference summit to be held tomorrow.
At least for the moment, Spain rules out having to go to the ESM. According to the economic vice president, Nadia Calviño, assured yesterday, before the meeting with her European counterparts, Our country does not currently have problems to finance itself in the financial markets normally.: “What I can confirm is that, of course, Spain does not currently plan to activate any type of extraordinary mechanism. We are in a very positive financial situation. ” The vice president recalled that last week our country had a debt auction that passed without major shocks and that yesterday the Treasury sold a seven-year syndicated bond with an over-demand three times higher than expected. For this reason, Calviño stressed that Spain is not considering a rescue through the ESM “at all at this time.”
Despite this posture of some tranquility, our country defends creating within the rescue fund a special financing line to alleviate the effects of the coronavirus that it would assume the functions of “a kind of safety net to guarantee liquidity” but with the objective of acting “according to insurance, not an immediate access line”. Accordingly, the Spanish Government does not propose that the countries that may need to use this tool in the future are forced to sign a tough Memorandum of Understanding with draconian adjustment measures, as happened in the past when our country had to ask for the ransom for your financial sector. A possibility that is also unaffordable in the short term precisely when the European Commission is haranguing the European States to use public money without hindrance to face the braking. For the first time in its history, the EU approved last Monday the de facto suspension of the Stability and Growth Pact that sets the public deficit of the States at 3% of GDP, through the so-called escape clause.
The Nordic countries, however, continue to oppose this position and defend the need for strict conditions for the disbursement of the ESM money, although its fulfillment is only possible afterwards.
Despite pressure from Northern hawks in general and from Germany in particular to open the door to Eurobonds, Berlin returned to pronounce one of its fearsome Nein yesterday. “We are ready to avoid a new debt crisis in Europe as much as possible. But I recommend caution when allegedly cool concepts come up that are the return of other ideas that have already been scrapped in the past, “said Peter Altmeier in an interview with the German economic newspaper” Handelsblatt “. Although the slope appears steep, Centeno yesterday preferred not to rule out that this option is possible in the future.