Meeting in an ‘enlarged Eurogroup’ format on Thursday 9 April, European Finance Ministers agreed on a package of measures valued at €500 billion to complete the anti-crisis arsenal already agreed for dealing with the current COVID-19 pandemic and the future socio-economic crisis (see EUROPE 12464/4).
The second attempt at this therefore turned out to be the charm and was much quicker, thanks to a prior agreement between the key actors. This package of four measures—which are on an unprecedented scale—comes on top of a freeze of the Stability and Growth Pact and the exceptional measures announced by the ECB.
In 2012, “Europe did too little, too late. This time it's different”, said the President of the Eurogroup, Mário Centeno.
ESM. The extent of the conditions attached to the activation of the ECCLs (Enhanced Conditions Credit Lines) under the European Stability Mechanism (ESM), the permanent rescue fund for the euro area, was one of the nodes to be cut.
Never having been used before, these lines of credit will be operational “within 2 weeks”, Mr Centeno promised. With a value of €240 billion, they will be activated in a standardised way in order to avoid stigmatisation and will not be subject to regular monitoring (by the ‘troika’). However, according to the Eurogroup president, institutional creditors will carry out “a prior assessment” and any beneficiary country, after the crisis, will reintegrate the European framework of governance and macroeconomic surveillance.
The countries that will call on the ESM, to the tune of 2% of their national GDP, will be subject to “very light-touch conditions", said French Minister Bruno Le Maire, referring to the in-depth work carried out upstream with his Dutch counterpart, Wopke Hoekstra.
At the request of the Netherlands, the aid will focus on “direct and indirect” health expenditure, specifies the Eurogroup report to the European Council. The ESM can provide financial help “without conditions for medical expenses” and will also provide “economic support, but with conditions”, Mr Hoekstra said on Twitter, calling the terms “fair and reasonable”. Later on, in front of the press, he did not rule out the possibility that the total ESM capacity of €410 billion would eventually be mobilised.
Italy, France and Spain wanted more support from the ESM. This assistance will also cover “costs related to the prevention of COVID-19”, according to the agreed report. For Mr Le Maire, the “business closure measures” imposed to stop the spread of the coronavirus will be included,
but “there will be no macroeconomic conditions”, the French minister emphasised. His Italian counterpart, Roberto Gualtieri, added that the conditions for activating the ESM had been “withdrawn”.
The agreed text states that the lines of credit will be available until the day upon which “the COVID-19 crisis is over”. Thereafter, the beneficiary euro-area countries will “maintain their commitment” to stabilise their public finances.
Reference was also made to countries outside of the euro area, which may, depending on their situation, benefit from assistance with balancing payments.
Recovery Fund. The Ministers say they are ready, if mandated by the European Council, to work on a recovery fund to finance economic recovery once the pandemic is over. This fund would provide funding “through the EU budget”, in line with European political priorities—the European Green Deal, digitisation—and would be initially targeted at those countries which are the “most affected”.
“On our side, this fund should be connected to the EU budget”, said Economics Commissioner Paolo Gentiloni. He referred to a European Commission proposal to this effect, perhaps at the same time as the revision of the proposal for the 2021-2027 Multiannual Financial Framework.
“Temporary, targeted and commensurate with the extraordinary costs of the current crisis”, the Recovery Fund would allow “these costs to be spread over time through innovative financing”.
Mr Le Maire indicated that this wording had required “12 hours” of discussions. From his view point, only a common debt would spread the costs over time and result in innovative financing. This fund, which could be set up in “6 months”, would cover “future expenditure” to the tune of “€500 billion”, he said. But he refused to use the terms ‘coronabonds' or ‘Eurobonds’ because “no agreement was made over the mutualisation of debts”.
Such sharing of debt remains a definite no in Germany, the Netherlands, Finland and Austria. Eurobonds are “unfair to Dutch taxpayers”, Mr Hoekstra said.
Some countries believe that funding for the Recovery Fund should come from a “common debt issuance”, but others are of the opinion that “alternative ways should be found”, Mr Centeno summarised.
SURE. The Eurogroup supports the proposal establishing the SURE instrument to help finance national short-time working schemes (see EUROPE 12460/1). This instrument will provide loans of up to €100 billion from the European Union to Member States. However, the guarantee to be provided by the Member States, totalling €25 billion, is not explicitly stated in the declaration.
As with the EIB’s pan-European guarantee fund, the calculation was reportedly contested by Member States, who will indicate the amount during the legislative process.
The scope and temporary nature of this initiative have been clarified and national competences in this area confirmed, explained Mr Hoekstra, in his response to EUROPE. In particular, the Netherlands specifically wanted SURE to cover the health sector as well.
It should be noted that, according to the Eurogroup, the SURE instrument does not prejudge future proposals on unemployment insurance planned for the end of 2020.
EIB. Finally, the Eurogroup endorses the EIB's initiative to set up a pan-European fund providing guarantees to European companies and SMEs to the tune of €200 billion. They are of the opinion that this initiative will help to maintain a level playing field in the internal market.
View the Eurogroup report: https://bit.ly/2JUyC3W (Original version in French by Mathieu Bion and Pascal Hansens)