EU member states clashed over the extent to which they should pool their resources in the fight against the economic fallout from the coronavirus, Germany and other northern states having rejected calls for introduction joint obligations.
During a five-and-a-half-hour video conference call, leaders struggled to unite around a collective strategy to manage the deep recession triggered by the epidemic. A post-meeting declaration instructed the Eurogroup to report in two weeks with proposals for a joint response, but the leaders did not define preferred options.
Speaking after the summit, Angela Merkel, the German Chancellor, said that Berlin’s preference was to rely on the European Stability Mechanism, the euro area’s 500 billion euro bailout fund. While some states were examining coronabonds, she said “not all member states agree”.
The inconclusive result underlines the deep divide within the euro zone as to the extent to which the bloc should devote common resources to the fight against economic damage. On Monday, the Eurogroup of finance ministers discussed a plan to adapt the MES toolbox to deal with the crisis, setting up the line of credit for improved MES conditions. However, this will require detailed and politically controversial work before it can be achieved.
Meanwhile, a number of EU states want the bloc to go much further. On the eve of the summit, an alliance of nine member states wrote to Charles Michel, president of the European Council, asking for the creation of a common debt instrument.
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The signatories, including France, Italy and Spain, wanted the new bonds to be of “sufficient size” and “long maturity” to finance health spending and post-corona economic reconstruction. Belgium, Ireland and Portugal were among the other countries to support the push.
However, the idea was quickly rejected by the northern member states, which long resisted the idea of joint debt issuance. After Thursday’s summit, Dutch Prime Minister Mark Rutte said there were “no circumstances” in which the Netherlands would accept Eurobonds.
He said that such ideas went “against the conception of economic and monetary union”.
The leaders said in their post-meeting statement that the Eurogroup should present proposals in two weeks, but they did not specify what they should look like and did not explicitly mention the MES.
“These proposals should take into account the unprecedented nature of the COVID-19 shock affecting all our countries and our response will be intensified, if necessary, by new actions in an inclusive manner, in the light of developments, in order to provide a response”, indicates the press release.
Merkel later clarified that Germany strongly preferred to focus attention on the MES rather than coronabonds. “With the MES, we have a crisis instrument which offers us many possibilities which do not call into question the basic principles of our joint and responsible actions,” she said.
Despite their difficulties in agreeing a collective response, EU leaders have made progress in other areas. They supported “a more ambitious and broader crisis management system” within the EU, saying that the bloc must “learn all the lessons from the current crisis”.
They also instructed Brussels to start working on a coordinated exit strategy from the emergency measures put in place to fight the crisis, saying that this should be done in consultation with the European Central Bank.
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The diplomats said the bloc wanted to make sure that the end of the blockades and other restrictions was better coordinated than the fragmented way in which they were deployed by different governments. Ursula von der Leyen, President of the European Commission, said that decisions on when and where the various measures should be canceled would be guided by science.
She also explicitly linked the “revival” of the European economy to an agreement on a new multiannual EU budget, saying that the issue could not be postponed much longer. The current seven-year budget will expire at the end of 2020.
“The strongest sign of European solidarity is a strong European budget,” she said. “This will have to be discussed over the next few weeks; We will have to figure something out. ”
European leaders have also pledged to “resolutely counter” the wave of disinformation that has polluted social media since the start of the crisis.
Report by Sam Fleming, Jim Brunsden and Mehreen Khan in Brussels, and Guy Chazan and Tobias Buck in Berlin