The agreement was reached on the sidelines of the meeting, during several hours of negotiations led by the Portuguese Mário Centeno. An approximation of some last-minute details has allowed concerted positions for ministers to announce a “bold and ambitious plan to protect our economies in response to this common threat”, as Centeno intended.
The plan involves a compromise reached between Germany, Spain, Italy and the Netherlands, which allowed to break the impasse. The halfway meeting allowed Italy to drop the requirement that loans be made in exchange for no conditions. On the other hand, Dutch Minister Wopke Hoekstra gives up intransigence regarding the conditions associated with loans from the European Stability Mechanism.
The money from this mechanism, created in the aftermath of the 2012 financial crisis, will come in exchange for softer conditions than those that Hoekstra was demanding with a speech with much criticism by the countries of the South. António Costa even classified it as “disgusting” the observations of this Dutch minister.
The European Stability Mechanism would make € 240 billion available to economies most exposed to the impact of the pandemic. Italy and Spain appear on the front line. But any other country can access the loans with very low interest rates proposed by this fund.
“The only requirement they have is to spend that money on health-related costs on cure and prevention,” said Mário Centeno, clarifying that once the crisis is over, States should follow a budgetary balance strategy, but without being obliged to efforts that penalize the recovery of the economy.
“If we are facing a temporary, symmetrical and totally exogenous crisis as a crisis, there is no reason to doubt that the previous past that we were all following will be taken up again and that countries will follow it,” he assured.
The version of the conclusions made public made clear the idea that there are countries that do not agree with the issuance of common debt. But, from this first agreement, Mário Centeno will again ask the finance ministers to work in an economy recovery fund.
“This fund will be temporary, targeted and proportional to the extraordinary costs of the current crisis and will help to disperse them over the years through appropriate financing,” he said.
“Some member states have expressed the opinion that this should be achieved by issuing common debt. Other member states have said that alternative ways should be found,” added Centeno, hoping that ministers can now work to find common ground on the sources of funding for the second part of the plan reached.
Some countries came to the meeting on the issue of issuing common debt securities – lately called coronabonds – as one of the red lines, as was the case in Austria, Finland, Denmark and, always decisive, Germany. But also from the Netherlands.
The Dutch minister brought instructions from his government to “see how aided countries can strengthen their competitive position” when talking about “solidarity”.
“It doesn’t have to be now, but what can they do after this crisis (…) to make their economies stronger? And a second point is that we are not in favor of issuing common debt in Europe. These are two important points in this discussion. And so, all countries have their own desires and, of course, try to reach their commitments, “said Dutch Prime Minister Mark Ruth, just before the meeting.
For the president of the Eurogroup, Mário Centeno, the agreement reached constitutes a set of “three safety nets” for Europe, “to protect workers, companies and countries’ finances”.
At the fifth crisis meeting within a month, European Union finance ministers were able to reach agreement on a plan to respond to the economic impact of the coronavirus crisis, after the divergences between north and south had intensified at the previous meeting.
In the afternoon, Centeno had dramatized the speech and called for unity. “We are in this together, all in confinement, with casualties every hour and with no end in sight. Every day we are reminded that this virus is blind. Blind with our flags, sex, color or social class. There are no first class passengers. We either swim together or sink together “, warned Mário Centeno, considering that we are facing” a real emergency “.
“This is global”, emphasized Centeno, in a message sent from Lisbon, even before the beginning of the work, which started three hours late, after contacting several European governments by phone to try to unblock the impasse. At the end of the meeting, there was applause, as the Eurogroup spokesman insisted on Twitter.
Financing SMEs and unemployment
Total loans can reach 240 billion euros in total, which gives about 2% of the national GDP for each country. Portugal can thus obtain more than four billion euros in liquidity.
“We also made agreements on additional financing for SMEs [pequenas e médias empresas] through the European Investment Bank [BEI]”said Wopke Hoekstra on Twitter.
Besides that,there is support for the labor market through the European budget (€ 100 billion line to finance unemployment benefits when the money runs out in national budgets) and “extra support for medical emergencies through an existing European emergency instrument to which countries can contribute”, said the Dutchman
With Luís Reis Ribeiro, journalist from DInheiro VIvo
News updated at 00.30 on April 10 with statements by Mário Centeno