Finance Ministers for the 19 Eurogroup countries of the 27-member European Union (EU) reached a compromise deal on Thursday to commit some 540 billion euros to fund the fight against the spread of COVID-19 across Europe.
But, the ministers backed away from committing to a so-called “Coronabonds” scheme urged by a group of European countries, including Italy, Spain and France, that would have given poorer EU member-states with economies hard-hit by the crisis access to tap into funds raised at reduced interest rates by all EU countries together through jointly issued debt instruments on global bond markets.
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The Eurogroup deal was announced Thursday in Brussels at the end of a second meeting of the group’s finance ministers in 72 hours, having failed to reach agreement on the funding mechanisms during a marathon 16-hour meeting that ran from Tuesday afternoon overnight until adjournment with no resolution early Wednesday morning.
The ministers agreed Thursday on funding for immediate emergency healthcare and short-term emergency economic initiatives during the coronavirus emergency, but separated out that funding from the issue of financing economic reconstruction for hard-hit economies once the immediate crisis has passed. Debate over an adequate funding mechanism for reconstruction was deferred to a later date.
The ministers agreed to recommend to their countries’ leaders that EU countries be allowed to tap into 240 billion euros from the European Stability Mechanism (ESM) bailout fund set up after the 2008 global economic crisis.
Access to those funds, however, will carry the proviso that the monies can only be used for emergency healthcare initiatives to stop the spread of coronavirus. Should any country use ESM funds to shore up its economy after the immediate crisis lifts, those countries will then be subject to EU scrutiny of their finances and expected to make economic reforms under the original terms on which the ESM was established.
Separately, the ministers agreed to recommend their countries provide 200 billion euros in loans to smaller businesses across the EU and provide 100 billion in loans to countries to underwrite the unemployment benefits they will pay out to workers temporarily unable to report to work due to restrictions imposed during the coronavirus crisis.
On the “Coronabonds” issue, the ministers agreed to disagree, setting aside any discussion of the proposal for joint borrowing to fund economic reconstruction across the EU. The ministers said they would consider the proposal only after instruction from the leaders of Eurogroup countries, who are slated to meet later this month to approve the measures agreed by the finance ministers and consider any additional joint actions to be taken.
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