Eurogroup fails to agree 2% GDP credit line
The Eurogroup of EU and Euro Zone finance ministers have failed to agree to extend a line of credit up to and not exceeding 2% of GDP after 16 hours of debate into last night.
Instead, the EU finance ministers will meet again today (Wednesday) to try and break the deadlock because Germany, the Netherlands and Austria are extremely reluctant to take on loans to help the economies of Italy and Spain which have been stricken by Covid-19.
The announcement was made via Twitter by the President of Eurogroup Mário Centeno who is also the Portuguese finance minister.
The tweet, in his personal account, said that an agreement had not yet been reached over financial measures to slow the impact of the virus and reboot the Eurozone economy but said steps had been made in the right direction.
“After 16 hours of discussions we are close to an agreement but we are not quite there. I suspended the Eurogroup meeting which will continue tomorrow (Wednesday)” he said.
“My goal remains: a strong EU safety net against the fallout of Covid-19 (to shield workers, firms & countries) & commit to a sizeable recovery plan.”
If agreed today, countries with difficulties will be able to access funds under a temporary relaxing of the European Stability Mechanism although the details of the agreement have not yet been defined.
A final decision will only be taken by the European Council today (Wednesday). At the same time in the United States, Congress is prepared to approve an economic stimulus package worth almost 10% of US GDP.
And because there are divergent views on how to financially tackle the crisis, Eurogroup cannot agree on pooling fresh EU debt through the issuing of Eurobonds (Coronabonds). Instead, it is likely to make it simpler and easier for Member-States to access European Stability Mechanism credit lines. It was the ESM that was partly responsible for providing finance for bailouts for Portugal and Ireland in the last sovereign debt crisis of 2011-2014.
As the President of Eurogroup, Mário Centeno explained at the end of the Tuesday meeting that the proposal on the table was an Enhanced Conditions Credit Line (ECCL) from the ESM so that each country to access finance up to 2% of its GDP.
The attached condition for this money is that it must be used to counter the negative effects from the Coronavirus.
In the case of Portugal, the amount would be around €4.2Bn. It was announced late on Wednesday evening that Eurogroup had yet to reach an unanimous decision on the exact shape the credit line would take.