Lluís Pellicer – Brussels 10 april
The French Minister of Economy, Bruno Le Maire, on wednesday during an appearance in Paris. Video, statements by Mário Centeno, President of the Eurogroup. IAN LANGSDON / POOL / VÍDEO: AFP
The EU finance ministers demonstrated again that progress only comes with pressure. The 27 finally approved an emergency package of more than half a billion euros on thursday to fight the pandemic after Spain and Italy ensured that access to these funds is not conditional on any adjustment or reform programme, as the Netherlands wanted. The EU finance holders also agreed to set up an economic recovery fund to be addressed by heads of state and government at the next summit.
The European Central Bank (ECB), President Christine Lagarde, was right to seek a simile with what the Eurogroup agreed to, this time made up of the 27 EU partners, was sought. In an interview at France Inter, she said that Europe was like an injured athlete, that she should continue to do some training so as not to atrophy. The same goes for the productive fabric of the continent. It just needs a bottom hose.
The president of the Eurogroup, Mário Centeno, was finally able to carry out his proposal. “This package contains strong and ambitious proposals that would have been unthinkable just a few weeks ago. We all remember the response to the financial crisis of the last decade, when Europe did very little and very late. This time it’s different,” he said at the end of the meeting.
The package is intended to be a triple safety net: for governments, companies and workers. The European bailout fund (Mede) will finally be the lifeline for governments that require funds in the event of a rapid deterioration of their public finances. The agreement activates up to 240 billion euros that can be requested by all euro area countries when they become available, within two weeks.
Spain and Italy won the battle for the Netherlands, so that access to this loan line, up to 2% of the country requesting it, does not involve tying themselves to a rescue programme, with adjustments and reforms. The text contends that “the only requirement” is for member countries requesting such appropriations to commit to using them to finance the direct and indirect health costs arising from the Covid-19 crisis.
In return, countries that ask for such appropriations commit to being within EU tax rules, including their margins of flexibility. Vice-President Nadia Calviño had made this reference to the rules of the Stability and Growth Pact the previous day. At a later press conference, Dutch Finance Minister Wopke Hoekstra admitted that the costs of defraying the costs of the pandemic are exempt from conditionality. But he warned that if a country needs a bailout, it will have to go through a program of adjustments and reforms. “It’s a way of ensuring that solidarity and reciprocity go hand in hand,” he said.
In addition to the Mede funds, the European Investment Bank (EIB) will mobilise a further EUR 200 billion for companies, especially SMEs, while the European Commission will issue bonds to finance programmes, such as the ERTE (temporary employment regulation dossier), that avoid mass layoff of up to 100 billion euros.
After wednesday’s early morning fiasco, France and Germany took the reins of negotiation to try to move the red lines of countries that had prevented the deal. In particular The Hague, which called for tougher conditions to access the Mede, and Italy, which did not want the rescue fund to be used. Centeno did not summon the holders again until there was a new draft on the table accepted by Spain, Italy, Germany, France and the Netherlands. It barely took a few minutes to approve. When they did, ministers exploded in applause from their capitals, according to a community spokesman.
France and Spain also managed to have agreed to work in a “recovery fund to prepare and support” the exit from this crisis. Ministers set out that this instrument, whose design and institutional fit should be finalized by the heads of state at the next summit, will be “temporary” and oriented to the “extraordinary costs” of the current crisis. It will also reflect the priorities set by the EU and ensure the Union’s “solidarity” with the countries most affected.
That fund could be an intermediate route between the two positions that divide the euro area and which summarized Centeno. “Some member countries have expressed their view that it should be done with instruments of common debt. Other Member States said alternative ways should be found,” he said. Economy Commissioner Paolo Gentiloni called for linking this fund to the EU budget.
Fear of a new shipwreck
Diplomatic sources confirmed that, after Wednesday’s early morning fiasco, German Vice-Chancellor Olaf Scholz and French Finance Minister Bruno Le Maire called several of their counterparts to pave the way for an agreement. German Chancellor Angela Merkel explained that she had spoken to Italian Prime Minister Giuseppe Conte, with whom she shared a diagnosis. “There is an urgent need for solidarity,” Merkel said. From the Elyseo, in turn, a message came out to The Hague: the blockade was “counterproductive, incomprehensible and could not last,” as he moved to the Agency France Presse. “A failure is unthinkable,” Le Maire added.
The possibility of that package being wrecked again put the leaders of the South on guard. “It’s a big challenge to the existence of Europe,” Conte said on the BBC. The Italian, very reluctant to the bailout fund, warned that another failure will mean a great “disappointment” for Europeans. The Spanish President Pedro Sanchez also issued an alert. “The EU is in jeopardy if it does not show seamless solidarity,” he warned. The European Central Bank President, Christine Lagarde, contributed her grain of sand in a grandstand in various media. “Solidarity is a matter of self-interest,” she said.
At the end of Thursday night, European Council President Charles Michel set the path where discussions between EU leaders and their ministers will go from now on. “We are now paving the way for a strong recovery to relaunch our economies,” he said through his Twitter account.