EU divided: Bloc’s economy faces COVID-19 collapse as bitter divisions emerge

EU divided: Bloc’s economy faces COVID-19 collapse as bitter divisions emerge

Eurogroup president Mario Centeno called a halt to the talks this morning after more than 15 hours of bickering over how to trigger the EU’s bailout fund. The row exposed the deep divisions between the richer north and poorer southern members of the EU’s single currency bloc. Tempers flared despite desperate attempts by Mr Centeno, who is also Portugal’s finance minister, to bridge the traditional divisions.

He said: “This is no time for business-as-usual politics, we must show our citizens that Europe protects them.”

Cash-stricken Italy, with the support of Spain, France and six others, are pushing for the EU to agree a mechanism to share the debt burden of the post-coronavirus economic recovery across the bloc.

They claim failure to prop up the high-debt countries risks a new Eurozone sovereign debt crisis that could endanger the currency.

There is a growing panic amongst the group that Italy, Spain and France’s response to the global pandemic could see their economies sunk by the debt costs in the future.

French finance minister Bruno Le Maire said: “Nothing would be worse for Europe than for some states, because they are richer, to get off to a quick start, while others, because they cannot afford it, start slowly.

“We all need to recover at the same speed in order to guarantee the cohesion, solidarity and unity of the eurozone and our common currency.”

But sceptics of the so-called “coronabounds” plan fear Rome, Paris and Madrid could be using the global pandemic to cash in on their wealthier northern neighbours’ recent financial success.

Germany sought to broker a peace deal between the warring factions by proposing the use of the Eurozone’s €410 billion European Stability mechanism, to provide emergency loans without tough political conditions.

After Italy rejected any concept with conditions being attached to lending, Berlin said credit lines could be issued without government’s facing an EU investigation into their accounts or prior commitments to spending cuts or structural reforms.

The Netherlands emerged as a clear stumbling block to the plan, with the start of last night’s delayed as a consequence.

Dutch finance minister Wopke Hoekstra insisted there must be preconditions if the ESM is going to be used as part of the coronavirus recovery.

He said: “I think it is reasonable and sensible that providing money goes hand in hand with reforms and agreements.”

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Mr Hoekstra declared it “too early to agree a total package”, insisting the Netherlands is still adamant that any joint debt mechanism proposals to aid recovery must be scrapped.

He said: “We think this will create more problems than solutions for the EU.

“We would have to guarantee debts of other countries which isn’t reasonable.

“The majority of the Eurogroup shares this view and does not support Eurobonds.”

Published at Wed, 08 Apr 2020 09:01:00 +0000