On Thursday night, EU leaders decided to develop a “Recovery Fund” to support governments with limited fiscal space. However, once again, they did not give any indication about the size of that fund and whether it will be made up of loans or grants. Market players have concerns that if the fund provides only loans then that will exacerbate government debt piles.
Certain governments in Europe, though, strongly believe this is the only way forward.
After the meeting with his EU counterparts, Sebastian Kurz, the Chancellor of Austria, said: “Austria is also ready to show solidarity to support the recovery of our economies.
“We should do this through loans. A mutualisation of debt or Eurobonds are not acceptable.”
On the other hand, highly-indebted nations, such as Italy and Spain, are pushing for grants instead, so their finances are less badly damaged.
The European Commission, the executive arm of the EU, has been tasked to present an idea for the Recovery Fund by early May.
How the EU was accused of coup after it threatened Greece with “paralysis of the country”
The proposal will be part of the wider EU budget plan for the period between 2021 and 2027.
As tensions are set to rise and economists wonder whether the coronavirus pandemic will be a more damaging rerun of the 2008 financial crash, unearthed reports shed light on how the bloc dealt with the succeeding southern-European public debt crisis.
In 2011, former Greek Prime Minister George Papandreou unexpectedly announced a referendum to approve a second EU bail-out deal for his austerity-hit country, less than a week after it was agreed with international creditors at a European Union summit.
However, the response by the democratic leaders of the EU was swift and crystal clear: Greece would not receive another cent unless Mr Papandreou was removed in favour of a “national unity government”.
According to a 2011 Telegraph report, José Manuel Barroso, the former Commission president, warned that unless Mr Papandreou was deposed, Greece would not be able get its next payment from the EU and the International Monetary Fund, leading to national default and bankruptcy.
He said: “What we expect to happen is to have a government of national unity.
Former President of the EU Commission José Manuel Barroso
Former Greek Prime Minister George Papandreou
“What is the other option?
“Default and have real difficulties to pay wages to the public servants, to the schools, to the hospitals, which will lead to paralysis of the country.
“I am sure that the majority of the Greek people do not want this kind of chaos.”
Even after Mr Papandreou abandoned his plan to hold the referendum, senior French, German and European officials demanded he stepped down to allow for a “technical” government that could implement the measures.
Mr Barroso said at the time: “We respect Greek democracy and Greece’s right to decide on its own future.
“At the same time, we need Greece to demonstrate commitment to the decisions that it has itself subscribed to.”
Economic analyst of the Open Europe think tank Raoul Ruparel said a new “compliant” Greek government would have been a “victory for the EU elite”.
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Brexit Party leader Nigel Farage
Brexit Party leader Nigel Farage accused then-Prime Minister David Cameron of giving tacit agreement to the overthrow of European democracies by supporting closer “fiscal union” in the eurozone and EU.
He said: “Cameron is actively encouraging the countries of southern Europe to sleepwalk into slow-motion, sugar-coated coup d’etat.”
Le Soir newspaper in Belgium described Angela Merkel and Nicolas Sarkozy as “putschists at the head of Europe”.
Mrs Merkel and Mr Sarkozy summoned Mr Papandreou to Cannes to instruct him to call off his plans to hold popular votes on Greece’s involvement in Europe.
The former Prime Minister was accompanied by Evangelos Venizelos, his then-finance minister, and they were given the ultimatum that Greece would not receive “a penny more” in aid payments unless Athens convinced the EU that it was “ready to make the commitments that come with euro membership”.
Former Prime Minister of Greece Lucas Papademos
On returning from the meeting, Mr Venizelos set about preparing the ground for Mr Papandreou’s departure and a new transitional national unity government involving the Right-wing opposition.
Mr Papanderou dutifully resigned on November 11, 2011.
His successor, Lucas Papademos, was sworn in two days later.
As a former Vice President of the European Central Bank (ECB), he was considered a safe pair of hands by the Troika: the consortium of the European Commission, the European Central Bank and the International Monetary Fund that provided the bailouts.
The Greek people, however, were not consulted.
Once in power, obtained with no democratic mandate, Mr Papademos’ government approved a further round of austerity measures in February 2012, including a 22 percent cut in the minimum wage, €300million (£262million) in pension cuts, and the tearing up of workers’ rights.
Published at Fri, 24 Apr 2020 12:46:00 +0000