Corona crisis: why finance ministers of the Eurogroup could not agree

Around 5:30 p.m. on Wednesday morning, France's finance minister bursts his collar. "We count the dead by the hundreds and thousands," while his colleagues played "with words and adjectives," complains Bruno Le Maire. "It is a shame for the finance ministers, a shame for the Eurogroup and a shame for Europe." This is what the participants of the session tell afterwards.

Olaf Scholz spoke before Le Maire. The German finance minister was more reserved than the French, but his message was also unmistakable. An agreement was to be reached – but even a German-French appeal at dawn could not force it. A few hours later, around 8 a.m., the Portuguese Euro Group leader Mario Centeno made a different decision and adjourned the round. It is now expected to continue on Thursday at 5 p.m. It is not a good picture that the EU is delivering: while the corona crisis has more or less brought most of the member states to a standstill, the euro finance ministers have been discussing for 16 hours without agreeing joint action to agree. Should this not succeed in the second attempt, it would be a disaster for the EU or – to speak with Le Maire – "a shame".

The north distrusts the south, and the various camps had come very close at night. It was a four-point package to deal with the economic consequences of the corona crisis. The ministers quickly agreed on the guarantee fund of the European Investment Bank (EIB): The EU countries should raise 25 billion euros with which the EIB should mobilize loans of up to 200 billion euros for small and medium-sized companies. Even details of the short-time work allowance initiative by EU Commission chief Ursula von der Leyen are still open, but the third point led to a violent dispute, which essentially dealt with an old topic: the mistrust between the supposedly rather economical ones Countries from the north of the EU and the more spending-friendly southern countries.

A key part of the planned Corona crisis package is the use of the ESM euro rescue package. It is intended to provide euro countries with low-interest loans of up to two percent of their respective economic output in order to combat the consequences of the corona crisis. According to Eurogroup leader Centeno, that would be a total of around EUR 240 billion, of which EUR 36 billion for the particularly hard-hit Italy. The question is under what conditions should the money flow. Combating the corona crisis is too vague a criterion in some countries, especially the Netherlands. Your fear: Countries like Italy or Spain could use the money to fill all possible budget holes.

Before the video conference, Dutch finance minister Wopke Hoekstra even called for ESM loans to be dependent on reforms of the social systems or an increase in the retirement age – demands that have enormous political explosiveness in the south of the EU, expressed cautiously. The ESM has been a toxic issue there since the Greek crisis. The notorious visits of the creditor troika to Athens, where seasoned ministers had to argue in front of European officials, have not been forgotten; even Germany declines the Dutch demands in this harshness – after all, it is about combating a pandemic that hits everyone, and not about sloppiness in dealing with national finances. It is "not expedient and also not appropriate" to combine the aid from the ESM with fundamental debates about pension systems and labor markets, said Federal Finance Minister Scholz. Germany is in line with France, Portugal and Spain, and a compromise could now be such that countries do not have to meet conditions for ESM aid that flows into the health system, but it does for investments in the rest of the economy. It remains to be seen whether this will happen. After the meeting, Hoekstra indicated on Twitter that the question could be decided personally by the heads of state and government. According to what you can hear, Chancellor Angela Merkel and other EU heads of government had been involved in the negotiations in the past few days, and the wires between the Ministry of Finance and the Chancellery were also tight on Wednesday night. The goal could now be a kind of preliminary compromise by the bosses, which the finance ministers will then finally negotiate on Thursday To stand pressure. In Italy, right wing Matteo Salvini drives the government ahead of him. Anything that smells of a capitulation in Brussels would be used for his own purposes, there is no doubt about that. In the Netherlands, on the other hand, Parliament had emphasized a restrictive line on Tuesday morning, especially at the ESM, which made the debate on part four of the Corona package difficult: the French proposal for a common fund to combat the economic consequences of the crisis. Here, too, it is all about borrowing together, but limited to ten years. The so-called "Recovery Fund" or "Solidarity Fund" is intended to help get rid of the tiresome issue of corona bonds, common debt instruments that Italy is particularly pressing for. It is also evidently being considered to partially feed the fund with money from the EU budget.

An agreement now seems possible, mainly because Germany and France have converged. The fund is mentioned in a draft final declaration, but not as a final fact, but as a goal on the road to reconstruction. It would be a typical Brussels compromise: France and the other EU countries calling for Eurobonds could say that they have achieved their goal. Germany, the Netherlands, Austria and Finland, on the other hand, could rightly emphasize that nothing has yet been decided in detail, because there is a risk of a new edition of a well-known conflict: Eurobonds supporters call for a communitization of debts, opponents say that this is not possible without shared responsibility in budgeting. One can not stand up for the debts of other countries without having a say in their creation, say it from government circles in Berlin. But that in turn would lead to a completely different economic and monetary union. How exactly the compromise fund should look in the end, "that will be the work of the next weeks and months," said Olaf Scholz at his press conference on Wednesday morning was probably more like "months".
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