BRUSSELS: European Union finance ministers failed in all-night talks to agree an economic support package for their coronavirus-hit economies but will reconvene on Thursday to iron out remaining issues, which officials said were not insurmountable.
Officials said a feud between Italy and the Netherlands over what conditions should be attached to euro zone credit for governments fighting the pandemic was blocking progress on measures worth half a trillion euros.
“After 16 hours of discussions we came close to a deal but we are not there yet,” Eurogroup chairman Mario Centeno said. “I suspended the Eurogroup and (we will) continue tomorrow.”
The finance ministers, who began talks at 1430 GMT on Tuesday and continued all night – with numerous breaks for bilateral negotiations – were trying to agree on measures to help governments, companies and individuals.
The package is aimed at providing a cushion against the economic slump that the pandemic is expected to cause and to show solidarity among European Union countries in the crisis.
But French Finance Minister Bruno Le Maire was quoted as saying at one point during the night in allusion to the wrangling, according to one official who participated: “Shame on you, shame on Europe. Stop this clownish show.”
Officially, in a coordinated Twitter message with German Finance Minister Olaf Scholz, Le Maire said:
“We call on all European states to be up to the challenge posed by these exceptional times so that we can arrive at reaching an ambitious agreement.”
Officials said the ministers could not settle on a common text because the Netherlands insisted credit from the euro zone for governments should come with conditions that would take into account, at a later stage, country-specific economic criteria.
Italy was ready to accept a generic reference to the need to stick to EU budget rules, but nothing more specific. Officials said that with the uncertainty of the epidemic’s effect on economies it was impossible to design any specific criteria.
“This is largely about language,” one official present at the talks said. “There is a broad understanding that in the short run conditionality should focus on health, and in the long run on the effort to return to a stable position.
“This is broadly understood, but the language proved to be extremely difficult to agree,” said the official.
The credit lines from the euro zone’s European Stability Mechanism (ESM) bailout fund could provide cash of up to 2% of a country’s GDP or 240 billion euros in total for the euro zone.
The ministers did agree to give the European Investment Bank guarantees that would boost its lending by an additional 200 billion euros, as a measure to prop up companies.
And they were in support of a European Commission proposal that the EU borrow 100 billion euros on the market to subsidise wages of individuals so that companies can cut working hours, not jobs.
Separately, there was broad agreement among the ministers that the EU would need a recovery fund to help the euro zone economy rebound from the recession, which in Germany alone will have shrink output by 9.8% in the second quarter.
But the ministers steered clear away from going into any detail of how such a recovery fund should be funded because such a discussion involved the highly contentious issue of whether the EU should jointly issue debt for that purpose.
Mutualised debt is a red line for the Netherlands, Germany, Finland and Austria, while Italy, France, Spain and several other countries believe that the extraordinary challenge of the pandemic calls for such extraordinary steps.
Paolo Gentiloni, the Economics Commissioner, argued this week that joint debt issuance would give all countries equal chances to recover – as they would all borrow at the same low rate – rather than deepen already existing economic divergences and in this way fuelling eurosceptic and nationalist sentiment.
But rather than creating a separate fund, officials hint that the recovery money could be linked to the EU budget.
The EU Commission could borrow on the market for the whole of the EU against a suitably increased long-term EU budget now under negotiation, and then lend on to individual governments, additionally boosting the resources through leveraging.
To support economies burdened by coronavirus lockdowns, the EU has already suspended limits on state aid and allowed member states to inflate their debt to spend more.
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