EU finance ministers will try again today to defuse a row blocking a multi-billion euro coronavirus rescue package for all member states.
Sixteen hours of talks on videolink, which straddled Tuesday and Wednesday, saw ministers fail to agree on a rescue package to help hard-hit member states face the coronavirus outbreak and the economic fallout. Brussels diplomats said the deadlock was caused by a bitter row between Netherlands and Italy over what conditions should be attached to a common debt insurance plan.
Italy want the EU-back loan scheme not to have any conditions for social and economic reforms. Netherlands remains insistent that, given Italy’s already huge debts, there must be conditions for EU taxpayers’ backing.
Talks, which included Finance Minister Paschal Donohoe tuned in from Dublin, are being confined for now to ministers from the 19 countries in the Eurogroup which use the single currency. They are due to report on the principles of an aid package to EU leaders who also spectacularly failed to defuse the same row when talked by videolink on March 26 last.
"After 16 hours of discussions, we came close to a deal but we are not there yet. I suspended the Eurogroup and (we will) continue tomorrow Thursday," said Eurogroup chairman Mario Centeno, who is the Portuguese finance minister.
A North-versus-South split, recalling the worst days of the eurozone debt crisis which erupted in 2008, continues to dog the issue. While Ireland is making overtures to align itself with countries like Netherlands, Sweden and others, it has largely backed Italy, by signing a letter last month with eight other member states seeking an EU-wide debt guarantee scheme.
This is sometimes called “coronabonds” and Netherlands’ opposition is shared by Germany, Austria, Finland, Sweden and others. But the entire European economy has been battered by the pandemic as national governments impose strict lockdowns which closed business and put normal life on hold.
Germany and its allies insist that any European rescue should use the eurozone's existing €410bn-euro bailout fund set up for cheap loans after the 2008 collapse. They also urge a wait-and-see approach to the massive monetary stimulus already unleashed by the European Central Bank.
Diplomats signalled that talks faltered on how to use the so-called European Stability Mechanism (ESM) bailout fund to help countries. The Dutch delegation insisted help could not come without some economic reform pledges.
"Because of the current crisis we have to make an exception and the ESM can be used unconditionally to cover medical costs," said Dutch Finance Minister Wopke Hoekstra.
Opting instead to issue debt bonds to raise the necessary funding would only create more problems for the EU, the Dutch minister added on Twitter.
France and Germany, the eurozone's most powerful states, said they had agreed compromise terms of using the bailout fund, which could offer a total of up to 240 billion euros. "With German Finance Minister Olaf Scholz, we call on all European states to rise to the exceptional challenges to reach an ambitious agreement," France's Bruno Le Maire said after the talks ended.
"Our collective responsibility is to come to an agreement within 24 hours. A failure is unthinkable," Mr Le Maire added.
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