Paris and Berlin seek a minimum agreement after the Eurogroup fiasco | Economy
By
Carlos Christian
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April 9, 2020
The EU continues to be unable to provide a common response to the economic crisis stemming from the continent’s greatest health emergency since the birth of the European project.
After 16 hours of negotiations, the Finance Ministers of the Twenty-Seven found that it was not possible to lift the blockade that Italy and the Netherlands were exercising on an agreement that would have allowed the mobilization of more than half a trillion euros.
Faced with the failure of dawn this Wednesday, Berlin and Paris are now trying to impose a minimum agreement to settle this chapter and begin to tackle the thorny economic recovery.
Finance holders were due to approve on Tuesday a battery of measures to protect Europe’s productive skin from the formidable erosion it is undergoing by the pandemic. The package on the table, blessed by Paris and Berlin, tries to build a safety net for public finances (€ 240 billion), companies (€ 200 billion) and workers (€ 100 billion) urgently. And then they had to begin to outline the attack with that sort of Marshall Plan that this time Europe will have to finance out of its own pocket.
Neither one nor the other. “There is an urgent need for an agreement on these issues,” Minister Nadia Calviño said on Wednesday, adding that citizens would not understand that such an agreement would be reached at Thursday’s meeting. “Europe is playing a lot in this crisis,” he concluded. The red lines drawn by Rome and The Hague made the agreement impossible after hours of breaks, bilateral meetings and drafts that ended up being unacceptable by either side. The main discrepancy was in the European rescue fund (Mede), which is called to act as a firewall in case this crisis ends up spreading to sovereign debt. The proposal carried out by the president of the Eurogroup, Mário Centeno, established that countries could receive an amount equivalent to 2% of their GDP to face the pandemic, but avoiding the stigma that resorted to using the Mede and stripping the credits of conditions of a rescue.
Italy had already shown its reluctance to the Mede before the meeting. The core is, however, in the conditions to obtain these lines of credit. The Netherlands insisted on a double phase of access: in the first, the money would be disbursed without conditions, but, once the urgency was met, the country should undergo a program of adjustments and reforms. Neither Italy nor Spain – who now say they have no intention of requesting these credits – accept this counterpart.
Not even the mediation of Paris and Berlin caused any of the parties to relax. Rome and The Hague were suspicious of every word that was reflected in a draft. Diplomatic sources agreed that to a certain extent it was a question of language, although they admitted that the chosen words could open the door to a rescue program. “As we count the deaths by the hundreds and thousands, the finance ministers are playing with words and adjectives. We will be judged by the markets. And then, for our citizens, “warned the French minister, Bruno Le Maire at five in the morning, French sources confirm.
But that warning didn’t work either. The Italian minister, Roberto Gualtieri, could enter the Mede game, but not accept the conditions of a rescue given the magnitude of the health emergency facing Italy. And even less with the pressure of Matteo Salvini calling on Italians to leave Brussels aside and proposing a kind of patriotic bonds. Dutchman Wopke Hoekstra attended the meeting tied by the backing of his Parliament, which had given the green light to that rescue in two phases. For this reason, some ministers considered the possibility of leaving that chapter open again so that it could reach the table of the leaders of the countries.
At eight in the morning, the ministers decided to resume their national agenda and put the discussion on hold until this Thursday. In view of this new attempt, Paris and Berlin urged Italy and the Netherlands, without naming them, to move. “We call on all countries to rise to the exceptional challenges to achieve an ambitious agreement,” said Bruno Le Maire and German Vice Chancellor Olaf Scholz in a coordinated message. French sources confirmed that the minister initiated new contacts to pave the way for a possible agreement.
Horse of battleGermany and France have agreed on this half a billion euro package. But when they turn this page, the real workhorse of Emmanuel Macron, Pedro Sánchez or Giuseppe Conte will arrive. The three continue to press for a mechanism to finance the recovery of Europe that this Wednesday also failed to find its place in the agreement of the ministers. At stake are not only millions of jobs, but also the danger that, after years of prosperity, this crisis will eventually reopen the gap between the North, capable of meeting all costs, and the South, hit by the pandemic and still prisoner of the inheritances of the Great Recession.
Italy insisted during the meeting on Eurobonds to cover the costs of reconstruction. But that instrument is still a taboo in Germany and the Netherlands. “The Netherlands continues to be against the idea of ??Eurobonds. We believe that this will create more problems than solutions for the EU, “said Hoekstra.
However, diplomatic sources point out that another instrument with the capacity to issue debt or be linked to the EU Budget could have a journey. France and Spain have already made the shift towards an intermediate solution in the form of a “recovery fund”. Diplomatic sources maintain that the ministers did not reject it, but agreed to leave that decision in the hands of the heads of state and government. Even so, in the early morning the partners of the euro had not closed the formula to fit it in the text of conclusions or in the letter that Centeno should send to the President of the Council, Charles Michel.
“The Mede is the mother of the lamb”“The Mede is the mother of the lamb. Once that matter is resolved, the rest of the issues will be closed quickly, ”said a diplomat. The European rescue fund focused hours of the Eurogroup debate, but it was not the only point that generated controversy. In fact, at every point in Centeno’s proposal there were discrepancies. Northern countries, for example, were suspicious of the aid system to prevent mass layoffs proposed by the Commission and asked that it be somewhat limited in time. Likewise, there were some doubts that the EIB loans could go to large companies by some capitals, although it was finally agreed to open their loans to all firms but focusing on SMEs. |
