European Union (EU) finance ministers will make another attempt on Thursday at approving a set of fiscal measures to combat the economic fallout of the coronavirus pandemic, after failing to overcome their differences in protracted talks earlier this week.
At stake is a trio of proposed measures with a joint firepower of around half a trillion euros (540 billion dollars).
These consist of a precautionary credit line from the eurozone’s bailout fund, the European Stability Mechanism (ESM); a guarantee fund from the European Investment Bank for business liquidity; and EU support for the salaries of workers who would otherwise be laid off.
Mario Centeno, the head of the Eurogroup of eurozone finance ministers, indicated earlier this week that there was broad consensus for these measures, but after 16 hours of overnight talks starting on Tuesday, the devil remained in the details.
A key sticking point was the question of conditionality attached to any ESM disbursement, diplomatic sources said.
Most ministers were happy to stipulate merely that the money must help fight the pandemic and that recipients must embark on a responsible fiscal course.
But the Netherlands went further, with Finance Minister Wopke Hoekstra demanding “certain economic conditions,” tailored to individual member states, sources said – a demand rejected by countries such as Italy in particular.
Nonetheless, German Foreign Minister Olaf Scholz expressed optimism on Wednesday of brokering a deal this week.
Another controversial element – championed by Italy, Spain and France – is the demand for common debt issuance, frequently referred to as coronabonds, as a tool to overcome the major economic contraction anticipated across the bloc this year.
Germany, the Netherlands and Austria are all staunchly opposed.
The solution could lie in invoking the possibility of an “innovative financial instrument” consistent with EU law, but the issue has not yet been discussed at length, according to diplomatic sources.
EU leaders had given the finance ministers two weeks to agree on a set of proposed measures, at a summit on March 26 at which they were unable to reach a compromise on the thorny issue. Any package of measures would require their ultimate approval.
EU member states and the European Commission have already taken a series of measures worth billions of euros to help cushion the economic impact of the coronavirus pandemic.