Europe aims for quick economic response to coronavirus crisis

The European Union is likely to focus on tools offered by the eurozone’s ESM bailout fund and the European Investment Bank in its economic response to the coronavirus epidemic, so that they can be used quickly, EU officials said on Monday.

Eurozone finance ministers, the Eurogroup, have two weeks to come up with ideas to support the economy after EU leaders failed last week to agree how to minimise the recession that the pandemic will put Europe into this year.

The ministers will hold a teleconference on April 7 and their chairman, Mario Centeno, said they should accelerate work on solutions already drafted last week.

“I propose that we accelerate the work we started on the possible use of the ESM and EIB resources and instruments,” Centeno said in a letter to the ministers, seen by Reuters.

The ministers have already suggested the use of the bailout fund’s standby credit line of up to 2 percent of GDP for all eurozone governments, to be used only by those who want it. A capital increase for the EIB – the investment bank of EU governments – is also on the table to boost lending to the economy.

But these options did not receive sufficient support from leaders last week because of a dispute about whether the eurozone should jointly issue debt in response to the health crisis.

France, Italy, Spain and six others want joint debt issues, while Germany, the Netherlands, Finland and Austria strongly oppose it.

Centeno said he was also ready to discuss new proposals for economic support from the European Commission. These are likely to focus on the use of money from the EU’s long-term budget, probably highly leveraged.

The Commission said it favoured measures that could be applied now and that would not create divisions like debt mutualisation, that was not only highly contentious but that would also take a long time.

“It is important that those options are quick, effective and based on a consensus among all the actors and in particular Member States,” the Commission said.

In another blow to the idea of jointly issued debt, which was never presented in detail, Centeno said he would discuss only “concrete, well-justified, effective proposals, which could help us step up our response”.

A German government source said there was cross-party unity among Chancellor Angela Merkel’s CDU, its CSU sister party and their SPD coalition partner on the use of the ESM.

Germany was willing to help countries such as Italy, “but for that we have the ESM which can activate hundreds of billions of euros”, the source said.