Squabbling EU states are moving closer to agreeing to use the bloc’s next long-term budget for a huge economic stimulus package that would kick in once the coronavirus pandemic ends, diplomats and officials said.
The package will top the agenda at an EU summit tomorrow.
However, the 27 national leaders remain at odds over how it would be implemented and seem virtually certain to defer any final decision.
The executive European Commission is trying to broker a recovery programme that could be worth as much as €1.5tn ($1.62tn). It estimates the outbreak may wipe as much as a tenth off the bloc’s economic output, the sources told Reuters yesterday.
The EU’s fiscally conservative northern nations remain keen to keep a tight rein on spending and have repeatedly rejected calls from the ailing southern states for a joint debt — sometimes known as ‘coronabonds’ — to fund the recovery.
“It’s a new episode of the same old fight — two camps pulling separate ways on sharing the financial burden in the EU,” one EU official said.
Seeking a compromise, the Commission told national envoys to Brussels on Monday that it wanted to finance the recovery through the bloc’s joint budget for 2021-27, said the sources who took part or were briefed on that meeting.
The Brussels-based EU executive could seek a temporary increase for 2021-22 of guarantees by member states for the budget’s resources, giving it leeway to raise more cash against that.
“Germany and the others (in the north) have been very clear what they think of coronabonds or Eurobonds.
That has not changed and the MFF (long-term budget) is now the preferred avenue,” an EU diplomat said.
German Chancellor Angela Merkel on Monday signalled readiness to finance economic recovery through a bigger EU budget and the issuance of joint debt via the Commission.
But major hurdles remain.
Austria, Denmark, the Netherlands and Sweden — like Germany part of the “frugal” camp — voiced reservations at the Monday meeting, the sources said.
They warned against debt mutualisation, demanded a clear time-limit on any emergency scheme, said it could take a year to put in place, and could only work as loans that individual countries would repay.
The Dutch ambassador told his counterparts that what some have dubbed a new Marshall Plan — a reference to the US rescue package for Europe after the Second World War — should not become a “sugar daddy” policy, according to the sources.
Meanwhile, “those who were pushing for joint debt as an instrument of solidarity will keep on pushing,” the diplomat said.
There are also huge variances on how big the recovery package will need to be.
Internal Markets Commissioner Thierry Breton told French broadcaster BFM TV yesterday he is working on a figure of around €1.6tn.
Spain, meanwhile has called for a fund worth €1.5tn, which is around three times the head of the eurozone’s bailout fund’s estimate.
Since the epidemic began, EU states have already clashed repeatedly over financial responses to it, on issues from how to share out medical equipment to ways of cushioning the immediate economic hit.
The bloc has already relaxed state aid rules and limits on public spending to help countries carry their economies through the slump, as well as unlocking half-a-trillion euros rescue plan.
But Rome, Madrid, Paris, Lisbon and others believe that is not enough and call for more solidarity, casting the challenge as an existential choice that some believe could make or break the EU. Including the 500bn already pledged by eurozone states, the European Central Bank has called for an overall fiscal boost worth between €1tn and €1.5tn, diplomats said.
With Italian bond yields up again yesterday, bond markets have been testing the ECB’s resolve to contain a rise in Rome’s borrowing costs amid dithering by eurozone politicians.
Following tomorrow’s summit, talking place via videolink, the Commission would present an updated draft of the 2021-27 budget on April 29.
It would have to be approved by all the 27 national capitals to take effect from next year, a tall order for the bloc at a time when coronavirus is bitterly testing its unity.
from Gulf Times https://ift.tt/2xNBaym
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