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European finance ministers have agreed to implement a €540bn economic package for countries hit hard by the coronavirus pandemic. The measures will help governments cover healthcare costs but also will support businesses.
Eurozone finance ministers reached a tentative agreement on economic relief of €540 billion aimed at negating the effects of the coronavirus pandemic, which will not insist on placing macro-economic conditions on credit lines from the bloc’s bailout funds.
The package would include access to cheap credit from the eurozone bailout fund, the European Stability Mechanism (ESM), more guarantees for the European Investment Bank to step up lending to companies, and a scheme to subsidize wages so that firms can cut working hours, not jobs.
According to the reports, the deal includes preparation of the European Stability Mechanism credit lines, an increase of the European Investment Bank’s lending capacity and the approval of the European Commission’s SURE package, which is designed to help protect jobs and workers affected by the coronavirus pandemic.
The group will reportedly also propose a recovery fund to help with the post-lockdown economic recovery.
Agreement Does Not Mention ‘Coronabonds’ for Eurozone amid Coronavirus
EU powerhouse Germany together with France, put their feet down to end opposition from the Netherlands over comparing economic conditions to emergency credit for governments weathering the impacts of the pandemic, and after assurances for Italy that the bloc would show solidarity.
However, the agreement doesn’t mention so-called coronabonds that Italy, France and Spain pushed strongly for but with which Germany, the Netherlands, Finland and Austria don’t agree.
French Finance Minister Bruno Le Maire stated Europe has agreed on the most important economic plan in its history. He said that the French government is expected to adopt a €100 billion stimulus package to support the economy amid the coronavirus crisis.
“These numbers could yet change as the economic situation and companies’ need of support is changing fast. We’re going all out to save our companies,” Le Maire stressed.
Lagarde: Every Lockdown Costs 2%-3% of GDP
European Central Bank President Christine Lagarde said earlier that each month of lockdown costs around 2% to 3% of GDP. “The longer the confinement, the more serious impact will be,” said Lagarde adding that a cancellation of debts from the crisis seems totally unthinkable to her.
Lagarde noted that vulnerable small companies must be helped but that if fiscal tightening happens too fast, it could be a trap.
She noted that there may be some other forms of European solidarity. As an example, she mentioned mutualized spending from a shared budget or a reconstruction fund. “We shouldn’t get fixated on coronabonds. Things take time in Europe,” stated Lagarde adding that any tightening of financing conditions will not be tolerated.
Earlier on Thursday, Italian Prime Minister Giuseppe Conte warned that the European Union risks failing as a project in the coronavirus crisis. Conte stated that the EU has to coordinate in order to help countries that are worst hit by the COVID-19 outbreak adding it needs to challenge what he calls “the biggest test since the Second World War.”
Merkel: Issuing Coronabonds Wouldn’t Be Appropriate
German Chancellor Angela Merkel asserted that issuing so-called coronabonds, common European bonds, wouldn’t be an appropriate response to the coronavirus crisis.
“You know that I don’t believe we should have common debt because of the situation of our political union and that’s why we reject this.”
During the conference call with Conte, Merkel stressed that the eurozone needs solidarity in its fight against the coronavirus impact as the bloc faces “one of its most difficult hours, if not the most difficult,” adding that “there are so many ways to show solidarity” and hoping that the EU will be able to “find a good solution.”