EU finance ministers have reached a compromise which can free up some €500bn in coronavirus aid – but they remain deadlocked over future debt-sharing proposals aimed at staving off a recession.
On their third attempt, after more than 20 hours of haggling, the ministers agreed multi-tiered rescue plans for European countries hit hard by the coronavirus epidemic.
But they side-lined a demand by Italy and Spain, supported by France and other member states including Ireland, for pooled EU borrowing to mitigate a huge expected recession in the virus aftermath.
While this vexed issue – commonly referred to as coronabonds - remains unresolved, the ministers still stressed other elements of the package deal. "Europe has decided and is ready to meet the gravity of the crisis," French Finance Minister Bruno Le Maire said soon after the marathon talks via videolink ended last night.
Irish Finance Minister, Paschal Donohoe also welcomed the result as a very significant agreement which was reached by the finance ministers who make up the Eurogroup of 19 countries using the single currency.
“It means support will be available for governments, employers and citizens. It took a few hours to agree, but only because this really matters. It is a very important step forward,” said Mr Donohoe, who participated in talks from Dublin.
Earlier this week a 16-hour haggling session, spread over two days, ended without a deal, and tensions between several countries ran high. EU heavyweights France and Germany helped broker a solution to fight economic consequences of the coronavirus pandemic, as the finance ministers resumed negotiations.
The ministers will now report back to EU leaders expected to have another videolink summit in the coming weeks. Ireland has already made common cause with a total of nine other member states which are urging an EU-wide coronavirus debt-support scheme, and the others included Belgium, Luxembourg, Portugal and Greece.
These talks focused on overcoming two major stumbling blocks to freeing up a huge multi-faceted EU-driven support package. One was opposition by the richer states to the idea of the EU underwriting member government debt incurred in fighting the coronavirus economic fallout – sometimes called “coronabonds.”
This fundamental row remains to be broached again. It is clear that Germany, Netherlands, Austria and the Nordic countries are implacably opposed and insist the move breaches EU law as it stands.
But compromise was found on the second point which was an insistence by Netherlands – and allied states – that strict economic reform conditions be attached to low-interest loans to countries like Italy and Spain. These loans would come from a fund set up in the wake of the 2008 banking and economic collapse and is called the European Stability Mechanism (ESM).
The progress made opens the way for an EU scheme to help Ireland and other member states underwrite the huge extra welfare payments caused by the coronavirus. The scheme called sure would allow the EU underwrite member states’ welfare debts and release up to €100bn in longer-term low-interest loans.
German Chancellor Angela Merkel had rejected the coronabonds initiative, arguing there was no "political consensus" for it. But more importantly, she revealed she had been in contact with France's Emmanuel Macron, the Netherlands' Rutte and Italy's Giuseppe Conte, saying that a compromise solution was "very close."
Chancellor Merkel's finance minster, Olaf Scholz, said in Berlin ahead of the latest conference that "it looks like an agreement is possible." But Italian Prime Minister Giuseppe Conte warned that EU leaders needed to seize the opportunity to put new life into the European project.
"It's a big challenge to the existence of Europe and to the history of Europe," Mr Conte told the BBC.