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In the end, things suddenly went very fast: at 9:32 p.m., the 27 EU finance ministers connected via video, and had agreed less than half an hour later. In the last hours of Maundy Thursday, just before an Easter weekend, they decided on a second attempt to provide a € 500 billion aid package to mainly help EU countries, which could be overwhelmed by financial consequences of the crown pandemic. After the lightning deal, the participants are said to have applauded.
What a contrast to the miserable negotiations only two days before. On Tuesday night through Wednesday, the finance ministers negotiated for 16 hours on video and, despite the marathon, they were unable to agree on financial aid. Olaf Scholz and some of his counterparts later said they were close to a deal when the meeting closed on Wednesday morning. Over the course of the day, however, this interpretation turned out to be quite optimistic.
The debate on European solidarity in the crisis, which was very emotional in some countries, brought the talks to the brink of failure despite intense previous preparations. In particular, the Italian government, fueled by left and right populists, had decided from the outset that corona bonds, bonds for joint debt, should be part of a European solution. They are essential if Germany and other countries with sound public finances really want to show solidarity with the heavily indebted southern Europe.
Loans from the euro rescue fund ESM, also under discussion, even on the condition that Corona’s debt be reduced in the medium term, were completely unacceptable by Rome and Madrid. There and elsewhere on the periphery of the euro zone, the ESM, whose programs in the euro crisis were monitored and implemented by the ECB troika, the IMF and the EU Commission, is the epitome of the loss of sovereignty and the lack of control on the part of the rich countries of the north.
For their part, they have their own sensibilities: the governments of Germany and Austria, for example, clearly reject joint debts, as fanatics of Corona or Eurobonds demand. According to a current survey, the majority of the population in Germany can fundamentally support EU financial aid in the Corona crisis, but the communication of debt is considered a taboo violation.
In the run-up to the negotiations, Dutch Finance Minister Wopke Hoekstra had spoken out against common debts and ESM loans especially without the condition of sound long-term financial management. And so it was the hardened positions of Italy and the Netherlands that broke an agreement in the first round of negotiations.
Paris and Berlin wanted the agreement
Some of Hoekstra’s counterparts were barely able to hide their anger at the stagnant positions in The Hague and Rome on Wednesday morning and decided to let out over the course of Wednesday that the Dutch in particular had prevented a deal. The indiscretions put pressure on the Dutch government and Finance Minister Hoekstra in their own country. At the same time, senior officials from national finance ministries telephoned and held video conferences all Wednesday and Thursday morning to reach a compromise before the second official negotiating date. Berlin and Paris in particular, which had mixed despite differing views on corona bonds, wanted a European deal.
However, positions in The Hague and Rome remained toughened until the start of the second round of short-term negotiations on Thursday. To avoid another disgrace such as Wednesday night, Portuguese Finance Minister Mario Centeno, who is leading the negotiations, decided to postpone the start of negotiations with the capitals individually and in small groups. Instead of what was planned at 5 p.m., the big video round should only start at 6 p.m., then at 7 p.m., and then the coordinators made no further predictions. The knot did not loosen until around 9 p.m. and there was a draft on the virtual table that the 27 participants could accept.
The compromise is largely based on corresponding proposals from the EU institutions, about which WELT had previously reported. It lays out three main measures to help companies, workers and EU countries that are overwhelmed with the financial response to the Corona crisis.
For companies affected by the crisis, the European Investment Bank (EIB), which is already making available € 45 billion in loans from Corona, will also create a “Pan-European Guarantee Fund”. EU states must participate in the 25 billion euro fund according to their participation in the bank’s capital. Germany, France and Italy are by far the largest owners and hold equally large shares. The fund is expected to mobilize up to € 200 billion through levers and guarantees.
A short-lived € 1 billion European job subsidy is supposed to help workers and self-employed people in the crisis: the European Commission, which proposed the € 100 billion program called SURE, wants to borrow money from markets and partly use funds from the existing budget. Above all, it is intended to provide financial security for national short-term labor benefit schemes and to encourage those EU members who do not yet have short-term labor schemes to consider them.
In addition, the ESM euro rescue package, which was created in response to the post-2009 euro crisis, will provide more than € 200 billion so that countries can borrow up to two percent of their economic output. in case of emergency. The purpose of this guarantee is to avoid speculation on bankruptcies if the government debt increases considerably in the coming months due to the serious economic upheavals of the Corona crisis and the enormous programs of support and economic stimulus.
The northerners have accommodated the southerners and, above all, Italy with the use of the euro rescue fund: the ESM treaty stipulates that the loans from the rescue fund are linked to economic conditions such as structural reforms. In this case, the conditions are so relaxed that the loans are granted practically unconditionally.
The money should only be used to finance the direct and indirect medical costs of the crown crisis or the costs of prevention, the decision says. With the expected generous interpretation, this should also include the economic consequences of the blockades. Centeno himself said when presenting the results that no country would have problems identifying measures equivalent to two percent of economic production: up to this amount, money can come out of the ESM.
Old euro bonds in new tubes
The finance ministers practically did not touch on a sensitive subject. From the outset it was clear that a discussion of the controversial “corona bonds” would have been a waste of time, it is said from the context of the negotiations. The positions are too far apart for this. Instead, they agreed to follow the proposal of French Finance Minister Bruno Le Maire to establish a fund to rebuild the European economy. Its objective is to be part or appendix of the seven-year budget of the EU that is currently being discussed.
According to Paris, the fund will be completed with several hundred billion euros. It is still unclear if the pot will really be that big and where the money should come from. Common European bonds are still being discussed. Continue to call these bonds “crown bonds”, but the finance ministers of France and Italy are now avoiding this as well. Northern tax conservatives are still against it anyway.
Finance ministers, however, relayed this sensitive topic with their fingertips: Heads of state and government should discuss it, possibly next week. No one expects an agreement; Why should heads of government agree faster than their finance ministers? Therefore, corona bonds must be discussed for weeks, regardless of name.
