EU puts pressure on the Netherlands to clinch virus rescue

By: AFP      Published: 01:41 AM, 10 Apr, 2020
EU puts pressure on the Netherlands to clinch virus rescue
Mario Centeno, Portuguese finance minister who chairs Eurogroup.–File photo

EU finance ministers resumed efforts Thursday to agree a rescue plan for Europe’s hardest-hit nations after the Netherlands blocked a compromise over bailout conditions.

The 27 ministers postponed by hours the official restart of their meeting, as key players exchanged phone calls in hopes of landing a compromise despite deep north-south divisions.

“Our citizens’ trust depends on us. We must come to an agreement,” tweeted Mario Centeno, the Portuguese finance minister who chairs the Eurogroup.

“There are no first-class passengers, we either sink or swim together,” he added.

The Hague surprised many with its inflexible stance, insisting that Italy and any other government caught short by the outbreak meet reform commitments if they turn to Europe for financial aid.

The sting was made all the painful after Italy and Spain were forced to sideline their goal of a joint borrowing instrument, now dubbed coronabonds, due to the opposition of Germany, the bloc’s most powerful member state.

Christine Lagarde, the head of the European Central Bank, said it was “vital” that ministers hatch a plan big enough to meet the challenge.

“If not all countries are cured, the others will suffer,” she wrote in an op-ed published in newspapers across Europe on Thursday.

The package on the table is worth about 500 billion euros ($550 billion), short of what many observers believe is necessary to restart the European economy when the health crisis recedes.

Data indicate that the economy across the continent is in meltdown with everyday life paralysed to fight the spread of the virus.

Despite 19 countries sharing a common currency, member states have reacted unilaterally to save their economies, giving richer countries such as Germany a big advantage over those with less spending power.

Italian Prime Minister Giuseppe Conte called for the burden to be better shared with leaders “facing an appointment with history” that they could not miss.

“If we do not seize the opportunity to put new life into the European project, the risk of failure is real,” he told the BBC.

‘See no point’

The main component of the rescue plan involves the European Stability Mechanism, the EU’s bailout fund which would make 240 billion euros available to guarantee spending by indebted countries under pressure.

Italy and Spain have the backing of the vast majority of member states to keep the conditions for tapping the ESM to an absolute minimum, but the Netherlands disagrees and demands reforms in return.

But conditionality is seen as a humiliation in Rome and Madrid, evoking bad memories from the eurozone debt crisis when auditors from Brussels dictated policy to bailed out Greece, Portugal and Ireland.

Despite his hard line, Dutch Finance Minister Wopke Hoekstra said he was still open to discussion on how to use the ESM bailout fund.

“But there are also matters that we cannot discuss, such as the eurobonds. We will emphasise that we do not see any point in this,” he told public broadcaster NOS.

Also called coronabonds, that referred to the especially touchy discussion on a solidarity fund that would be paid for by European partners jointly borrowing money on the financial markets.

The plan was proposed by Spain, Italy and France and has been handed off to EU leaders who are expected to meet by videolink later this month.

The mutualisation of debts is a red line for Berlin and The Hague, which refuse to engage in a joint loan with highly indebted states such as Italy, France or Spain which they consider too lax in their public spending.

Repeating her well-known position, German Chancellor Angela Merkel on Thursday firmly rejected the notion of pooled debt in Europe.

“But there are so many other ways to show solidarity and I think we can find good solutions here,” she added.

In addition to the eurozone rescue fund, the EU ministers will also debate 200 billion euros in guarantees from the European Investment Bank (EIB) and a European Commission project for national short-time working schemes.