Nine eurozone countries issue call for ‘coronabonds’

France, Italy and Spain and six other eurozone governments have called for the issuance of a common European debt to finance the fight against coronaviruses, provoking a clash with capitals including Berlin who believe that this decision is premature.

In a joint letter to the President of the European Council, Charles Michel, the leaders of the nine countries said that the EU must “work on a common debt instrument issued by a European institution to raise funds on the market on the same basis and for the benefit of all members ”. States “.

They argue that the move would guarantee “long-term stable funding for the policies needed to counter the damage caused by this pandemic.”

The intervention came a day before a planned video conference of EU leaders, which is expected to galvanize the next steps in responding to the crisis in Europe.

But concerted pressure for so-called coronabonds threatens to widen the divide between capitals as to the extent and speed with which the EU should exploit common tax solutions to combat the economic destruction unleashed by Covid-19.

Eurozone finance ministers on Tuesday were unable to agree on a firm plan for the bloc’s bailout fund, the European Stability Mechanism, to issue lines of credit to help cope to the crisis, and many details remain to be defined.

Germany fears that the bloc will exhaust its possibilities for centralized budgetary action too early in the crisis, before the true extent of economic needs becomes clear. The Dutch government has even more reservations, stressing that the MES should be the last resort and firmly excluding coronabonds.

The idea of ​​joint coronabonds is particularly controversial because it moves away in the field of the issue of mutualized debt by the governments of the euro zone, resuscitating the concept of “eurobonds” which has been rejected several times by Netherlands, Germany and other northern members of the monetary bloc as fundamentally incompatible with their vision of monetary union.

Peter Altmaier, the German Minister for the Economy, said that the discussion on Eurobonds was a “phantom debate”. “I urge you to be cautious when supposedly new and ingenious concepts are presented, which often are just long, rejected ideas from the dead,” he told Handelsblatt.

Asked about the joint bonds, Dennis Kolberg, a spokesman for the German finance ministry, said that Berlin had “already agreed to a full package of measures and that there is an ambitious and focused program at European level. . . We have with the ESM a powerful, functional and proven tool that can provide powerful and fast support. ”

But French President Emmanuel Macron, Italian Prime Minister Giuseppe Conte, Spanish Prime Minister Pedro Sánchez and others have argued that the fight against Covid-19 is a special case, constituting an external and symmetrical shock that affects all countries.

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The same argument was advanced by the President of the European Central Bank, Christine Lagarde, who urged the finance ministers during Tuesday’s videoconference to go further than the MES proposal and to adopt the use of coronabonds, have said people familiar with the discussion.

The signatories to the letter – who also include the leaders of Portugal, Ireland, Greece, Slovenia, Luxembourg and Belgium – said the arguments for a common borrowing instrument ” are solid. “

“We are collectively responsible for an effective and united European response,” they wrote in the letter of March 25.

“This joint debt instrument should be large enough and have a long maturity to be fully effective and avoid the risks of rollover now and in the future,” they wrote. “The funds collected will be used to finance the necessary investments in the health system in all the Member States.”

The letter also says that EU countries “must ensure that essential value chains can function fully within the borders of the EU and that no strategic asset is the target of hostile takeovers during this phase of economic difficulties ”.

It calls on the European Commission to provide “agreed guidelines, a common basis for the collection and sharing of medical and epidemiological information, and a strategy for dealing with the phased evolution of the epidemic in the near future”.

Additional report by Martin Arnold in Frankfurt

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