French Thrift and Finance Minister Bruno Le Maire (R) and Portuguese Finance Minister and Eurogroup chief Mario Centeno speak as they go to a Eurogroup meeting at the EU headquarters in Brussels on February 17, 2020.
FRANCOIS WALSCHAERTS
There is growing optimism that euro zone holdings ministers will approve new funding to the countries wrestling with the coronavirus pandemic, but division over so-called “corona sticks” is likely to remain.
European economies are at a standstill after many governments implemented national lockdowns to reduce the total of infections from COVID-19, the virus that emerged in China in late 2019. People have been affixed at home for almost a month, meaning all non-essential businesses have closed their doors across most European realms.
The economic and political pressure has resurfaced old divisions among European nations. However, three Brussels-based officials, who didn’t thirst for to be named due to the sensitivity of the issue, told CNBC that member states are now moving toward an agreement.
“We are almost there,” an EU formal from one of the largest EU economies, told CNBC Monday over the phone.
A second official, from a northern European sticks, said “we are hoping for an agreement.”
A third person close to the talks said: “We are not there yet,” but “there is a convergence (in opinion).”
Euro zone subvene ministers — from those countries that share the single currency — are due to have a video call Tuesday, after a get-together between the 27 EU heads of state failed to deliver any meaningful conclusion about two weeks ago.
The three officials indicated ministers are likely to approve a credit line through the region’s crisis fund — the European Stability Mechanism (ESM). The unalloyed credit line would be 2% of the euro area GDP (gross domestic product), roughly 240 billion euros ($258.82 billion) and be handy to every nation in the 19-member euro area region.
There would be in return “very, very light conditionality,” the assist official said, adding that there would be “no Troika,” referring to the three institutions that monitored how bailed-out lands were performing in the wake of the sovereign debt crisis of 2011.
The idea of making loans available through the ESM has provoked some critique in Italy, where the government does not want tough deficit and debt criteria attached to any loans. Rome credits the pandemic is hitting every EU nation and therefore no country should be punished with strict measures in exchange for pecuniary support.
“The funds must not come with any unnecessary conditions attached, as that would be tantamount to a rerun of the austerity means that followed the financial crisis and would lead to unequal treatment between individual member states,” the German churchmen of finance and European affairs said in an opinion article on Monday.
“The ESM already permits euro zone countries to sponge capital together on the same favourable conditions. For Italy, this would mean a fresh injection of 39 billion euros, and for Spain, 28 billion euros. They should be admitted to use this money for all necessary expenditures to fight the coronavirus,” the ministers also said.
Additionally, ministers are expected to approve assist help through a pan-European guarantee fund that could ultimately reach 200 billion euros, as extravagantly as greenlight a European Commission proposal to raise 100 billion euros in financial markets to mitigate unemployment elevations.
However, corona bonds — which describe the idea of issuing joint European debt — remain the big elephant in the apartment.
Nine EU countries, including Italy, Spain and France, have asked their counterparts to fund some of the charges of the coronavirus crisis through joint debt issuance. However, this idea has sparked fierce opposition in the Netherlands and Germany, where the separate governments are reluctant to take such action.
“The debate is still ongoing about whether we should go further,” the basic official said.
Since the pandemic began spreading across Europe in late February, the EU has also scrapped its economic rules to allow countries to spend more during this crisis. It has set up a 37 billion euro investment repository to support businesses all over Europe, and relaxed state aid rules.
However, the biggest financial help has been from the European Key Bank. The institution is buying 750 billion euros in European bonds until the end of the year — an announcement that has lowered the rates for European governments in financial markets.