With failure not an option, finance ministers of the eurozone forced themselves to reach a compromise coronavirus stimulus package providing €540 billion ($591 billion) to its 19 member states. Europe remains the hardest hit by the global COVID-19 pandemic with four of the five worst hit countries coming from the continent.
The package has provision for a €240 billion ($263 billion) credit line available within the month through the European Stability Mechanism (ESM), a fund established in the wake of the 2011 sovereign debt crisis.
Finance ministers also agreed every eurozone country will be able to request up to 2% of their GDP to finance "direct and indirect" costs related with the crisis. They also consented to increase the lending capacity of the European Investment Bank with a pan-European guarantee fund capable of reaching €200 billion ($219 billion). There's also a new €100 billion ($109 billion) initiative to slash unemployment. Both these programs are available to all EU member states, but the ESM credit line is available only to eurozone members.
The compromise reached Friday after the failure of the initial talks Wednesday came after marathon negotiations that led to The Netherlands finally relenting on its opposition to the measures. Chancellor Angela Merkel of Germany and French President Emmanuel Macron together bore down on Dutch Prime Minister Mark Rutte to soften his opposition to the package, especially to the controversial "corona bonds."
The fate of the corona bonds, however, remains in limbo. Corona bonds, also called Eurobonds, are a financial instrument that will combine debt securities from the 19 eurozone countries. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Portugal, Slovakia, Slovenia and Spain.
Eurozone ministers failed to approve these special instruments championed by the hardest hit COVID-19 countries of Italy and Spain. The compromise reached leaves the decision on the corona bonds to the heads of state of each Eurozone member country.
″The signal of mutual support is not as strong as it should have been," wrote economists at multinational full-service investment bank, Berenberg Bank, based in Hamburg. One of the reasons being "they did not resolve the dispute about joint bonds (corona bonds) to finance a joint recovery fund," they pointed out.
Eurozone members remain at odds over how to fund some of the mind-numbing economic and financial costs engendered by the pandemic. The fiscally conservative northern European nations remain opposed to the coronavirus hit southern European nations. They remain unwilling to accept calls to create the corona bonds.
Also, the proposal to use the ESM raises fears of another wave of austerity tearing through both the eurozone and the EU.
