Abu Dhabi, UAESaturday 6 June 2020

EU leaders order recovery plan for after coronavirus

Talks came as coronavirus death toll in Europe soared well beyond 13,000 people

President of European Commission, Ursula Von der Leyen at a mini plenary session of European Parliament in Brussels, Belgium. AFP / Aris Oikonomou
President of European Commission, Ursula Von der Leyen at a mini plenary session of European Parliament in Brussels, Belgium. AFP / Aris Oikonomou

EU national leaders told finance ministers on Thursday to find new ways to tackle the devastating economic effects of the coronavirus pandemic after failing to bridge differences over how best to share the burden.

During six hours of video conference, the leaders also called on the EU executive arm, the European Commission, to draw up a strategy for reviving economies after lockdowns and other health measures are lifted.

The talks came as the death toll in Europe from Covid-19 soared well beyond 13,000 people.

Spain has just prolonged a state of emergency, while French President Emmanuel Macron launched “Operation Resilience”, a military-backed response to battle the illness.

“This crisis is exceptional and unique, and requires a very strong answer," EU Council President Charles Michel said after the summit.

Eurozone finance ministers will have to come up with proposals for economic relief “within two weeks", he said.

As the virus has taken hold, the Commission has permitted unprecedented border and economic measures so that embattled member countries such as Italy and Spain, and many others, can save supply chains and businesses.

The leaders all acknowledge the extent of the crisis and the need to support Italy in particular,

But they are divided over whether to use every economic tool at their disposal now or keep something in reserve in case of a second wave of infections.

Finance ministers from the 19 countries using the euro currency agreed in principle this week to letting partners in distress borrow up to 2 per cent of their gross domestic product from the European Stability Mechanism.

The bailout fund was set up during the debt crisis a decade ago with lending assets of €410 billion ($453bn/Dh1.66 trillion).

A group of nine nations wants the immediate introduction of “coronabonds,” shared debt backed by all eurozone countries.

This would let even those hardest-hit borrow at sustainably low interest as their spending grows on hospitals and measures to stop businesses going bankrupt.

But that idea is distasteful to countries such as Germany and the Netherlands, which have long objected to common borrowing.

They are averse to the risk of them paying for the finances of vulnerable countries and believe it reduces incentives for other nations to control their deficits.

Europe must “start to prepare the measures necessary to get back to a normal functioning of our societies and economies and to sustainable growth", the leaders' joint statement said.

It stressed that the plan must include “a co-ordinated exit strategy, a comprehensive recovery plan and unprecedented investment".

The coronavirus crisis comes nine months before the EU’s long-term budget expires.

Talks on the next seven-year spending plan are in deadlock, with a small group of countries, led by the Netherlands, refusing to contribute more money to fill a gap left by the departure of Britain.

European Commission President Ursula von der Leyen said her office and agencies stood ready to support the EU's 27 member countries with every tool at her disposal.

“But we must be very clear, we are in the final year of a seven-year budget," Ms von der Leyen said.

"This crisis shows how important, indeed crucial, it is to have a budget that can deal with complex crises such as this one."

As governments wrestle over shared borrowing, the European Central Bank increased its efforts to bolster the economy.

The regulator dropped a long-standing limit on its purchase stimulus of no more than a third of a country's government bonds.

That means its €750bn pandemic emergency purchase programme announced last week can be used to support hard-pressed countries such as Italy.

Updated: March 27, 2020 03:54 AM

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