On April 10, after three days of difficult negotiations at the Eurogroup of Euro Area finance ministers, a deal was reached on the measures to address the economic consequences of the coronavirus pandemic. For Southern European countries, the agreement is a serious political defeat. For Europe as a whole, the agreement is a setback for the possibilities of keeping the European political project alive.
The Eurogroup final document on the economic policy response to the Covid-19 pandemic identifies three financing instruments and includes the promise of a recovery plan – yet to be written. The former include the SURE instrument, addressing sudden increases in public expenditure for the preservation of employment; new financing for companies from the European Investment Bank (EIB); access to European Stability Mechanism (ESM) credit lines to meet healthcare costs alone, without conditionality concerning macroeconomic and budgetary policies. Together, these instruments provide €540 billion, between 3 and 4% of the European Union GDP. According to the European Central Bank, this is about a third of the resources which would be necessary to face the coronavirus crisis – €1,500 billion.
The Eurogroup failed to agree on the introduction of Eurobonds, based on a mutual responsibility of EU countries in raising financial resources to address the common pandemic crisis. In their place, the Eurogroup announced the establishment of a temporary ‘Recovery Fund’, ‘targeted and commensurate with the extraordinary costs of the current crisis’. It should mobilise resources for an additional €500 billion – though this amount has not been specified yet. It will be up to the European Council – with the heads of governments - to discuss the ‘legal and practical aspects of such a fund, including its relationship with the EU budget’ and ‘its sources of financing’. For its financing, the document announces ‘innovative financial instruments, consistent with EU Treaties’. A vague wording for the reality of the refusal of any debt sharing. The hard line position of the Netherlands and Germany won the day. For Italy and Southern Europe, strong advocates of the introduction of Eurobonds, this has been a heavy defeat.
