As Europe’s economy heads towards recession, its leaders are at loggerheads over the issuing of so-called “corona bonds”.
A group of countries led by Germany and the Netherlands are against such bonds, which seek to share the debt burden of paying for the coronavirus response and rebuilding economies afterwards.
Nine countries including those worst hit, Spain and Italy, are pushing for the EU to ensure solidarity goes from words to financial actions.
“A no to solidarity at this moment would put in danger all our project,” Paolo Gentiloni, the EU’s economy commissioner told Euronews.
His comments come after a tense talks between EU leaders last Thursday ended without any agreement on how to finance the response to the economic fallout of coronavirus.
Gentiloni added there are many tools to help the economy bounce back, including the possibility to use the European Stability Mechanism (ESM), the method preferred by Berlin. The ESM, would provide a conditional credit line to those countries in need.
Finance ministers meet later this week — via video conference — to hammer out the details of a “toolkit”.
But building consensus around short-term measures could prove tricky, especially when it comes to “corona bonds”.
“The issuing of bonds in financial markets should be targeted to our goals and by this tool or other tools that we can identify, we have to share the commitments to this target, not something that single countries stronger or weaker can afford alone,” says Gentiloni.
The pandemic has put stress on the global economy, with some economists saying the downturn could be worse than the 2008 economic and financial crisis. It’s a moment in EU history, that rattles nerves.
“We can’t avoid a recession in the situation where we have a lockdown of our cities, our services and in several countries also our companies in general,” admits Gentiloni. “But we can also have a strong bounce back after the recession.”
Brussels has already loosened state aid rules as well as limits on public borrowing, allowing countries to spend more to save businesses in trouble.
Whether Europe can bounce back and what shape the recovery will take depends on what actions the member states take individually and collectively in the days and weeks to come.__EuroNews