EU finance ministers are at loggerheads after hours of late-night negotiations over common initiatives they could introduce to stop the coronavirus from obliterating the bloc’s economy.
Factions led by Italy and the Netherlands clashed during Tuesday’s online Eurogroup meeting over conditions for credit lines from the eurozone’s bailout fund and the idea of pooling debt, officials on the call told POLITICO.
Eurogroup discussions began at around 4:30 p.m. over videoconference and were still ongoing in the early hours of Wednesday morning.
Without an agreement on coordinated action, governments will be left to their own devices and have to borrow money from the markets to cushion the economic fallout — threatening a debt crisis.
Governments have collectively pledged hundreds of billions of euros to keep their national economies afloat.
Eurogroup President Mário Centeno, who is in charge of mediating the talks, is scheduled to hold a press conference 10 a.m. Wednesday to present ministers’ conclusions.
Ministers are aiming to agree on at least three initiatives that would help governments prevent mass bankruptcies and spur economic recovery once countries end their lockdowns, introduced to stop the spread of the pandemic.
One of those initiatives is the European Commission’s proposed temporary unemployment reinsurance plan, worth €100 billion. The cash pot would support public programs that allow companies to reduce working hours and compensate their employees for any lost income.
The second comes from the European Investment Bank, which has pitched a €200 billion fund that can issue cheap loans to EU companies that are starved of cash.
Finally, there’s the eurozone’s bailout fund, known as the European Stability Mechanism (ESM), from which any country that uses the common currency could draw a credit line worth 2 percent of its economic output — under certain conditions.
All ministers need to agree on the initiatives before they package them in a statement to send to country leaders for final approval. But differences persist, the officials said.
Rome is determined to lighten, or even drop, the ESM credit lines conditions. The Dutch, backed by Austria and Finland, disagree.
The Hague is adamant that governments using the credit lines must promise to reserve the money for coronavirus health care and economic costs. States must also commit to ensuring their finances look healthy in the long-term.
The latter condition rings alarm bells in Italy, which fears any talk of fiscal surveillance could spook international investors and push up borrowing costs.
Another disagreement is over the idea of issuing EU corona bonds to finance the bloc’s recovery. Italy is fighting to include the prospect of issuing joint debt in the Eurogroup statement to leaders.
But any suggestion of pooling debt is too much for the Dutch and Germans, who fear they’ll ultimately be left holding the bill if southern countries go broke.
France had tried to cool any talk of corona bonds by proposing a one-off fund that could raise debt and issue loans to governments. That’s still too controversial to consider for now, the officials said.