EU to close deal on coronavirus package as Germany gives up

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BRUSSELS (Reuters) – The prospects for a European Union agreement on a package of measures to support its coronavirus-stricken economies brightened on Thursday as Germany dismounted to end the opposition from the Netherlands and reassuring Italy that the EU would show its solidarity with it.

FILE PHOTO: Italian Prime Minister Giuseppe Conte addresses the Senate, the upper house of parliament, on the spread of coronavirus disease (COVID-19), in Rome, Italy, March 26, 2020 REUTERS / Alberto Lingria / File Photo

Earlier, Italian Prime Minister Giuseppe Conte said that the existence of the EU would be threatened if it could not come together to fight the pandemic, as objections from the Netherlands blocked an agreement that all other countries were ready to support.

For weeks, the 27 EU member states have failed miserably to show the bloc’s supposed solidarity with perhaps its greatest challenge, bickering not only over money but also over border restrictions and the ban medical exports. “An agreement is possible,” said German Finance Minister Olaf Scholz, noting that the Netherlands has softened its stance on demanding difficult conditions so that countries like Italy and Spain can tap into the aid funds.

Italian 10-year bond yields fell to 1.599% from 1.614%.

“We are trying to do our best to help bring the negotiations to a successful conclusion,” Dutch Prime Minister Mark Rutte told reporters in The Hague shortly before the meeting of European finance ministers by videoconference.

German Chancellor Angela Merkel had previously had phone calls with Rutte and Conte.

“NEED FOR SOLIDARITY”

She said that she and Conte had agreed on “the urgent need for solidarity in Europe, which is going through one of its most difficult hours, if not the most difficult”.

“And Germany is ready for and committed to this solidarity. The well-being of Germany depends on the well-being of Europe, “she said.

She said Berlin would not accept a jointly issued debt, which Italy, France and Spain were demanding, but a taboo for northern EU members, but said other financial routes were available.

Officials said Merkel had also asked Rutte to stop blocking the deal, which is intended to provide a safety net for governments, businesses and individuals against the deep recession the pandemic is expected to cause this year.

“The feeling in Germany is that everyone has done enough posture for their national audience. It’s time to get together, “said a senior EU official in Brussels.

So far, discussions have been tense between the north, which is more fiscal conservative, and the indebted south, which has been the hardest hit by the pandemic.

Having already spoken for 16 hours, the ministers were to resume discussions at 19 hours. (1700 GMT) Thursday.

Dutch Finance Minister Wopke Hoekstra said that some of the most contentious technical issues should still be passed upstairs to national leaders.

But the senior official said Merkel was opposed to this:

“She wants the finance ministers to really agree on a package, not just to fix it and bring it to the table of leaders. If the ministers fail again today or tomorrow morning, they will only have to meet again. “

THREE BILLION EUROS

The package under discussion would bring the EU’s total budget response to the epidemic to 3.2 trillion euros ($ 3.5 trillion), the largest in the world. But some of its elements revealed deep divisions over the sharing of the financial burden of crises, evoking bitter conflicts and mistrust of the 2010-2012 sovereign debt crisis.

The problem is to agree on the conditions under which euro area governments could access cheap credit from the euro area rescue fund, the European Stability Mechanism (ESM).

Italy and most other countries are willing to accept very light conditions, but the Netherlands wants tougher rules, including country-specific economic criteria, which are politically unacceptable to Rome.

FILE PHOTO: German Economy Minister Peter Altmaier speaks with journalists about changes to the country’s export laws in Berlin, Germany, April 8, 2020, as the disease spread to coronavirus (COVID-19) continues. Michael Kappeler / Pool via REUTERS / File Photo

The package also includes more guarantees to help the European Investment Bank support businesses, and a wage subsidy scheme so that businesses can cut working hours, not jobs.

A separate plan to finance recovery from the epidemic raises more questions. France and the countries of the South want money – perhaps up to 3% of the EU’s GDP, or more than € 400 billion – to be borrowed jointly by all EU states.

It is a red line for Germany, the Netherlands, Finland and Austria, which strongly oppose the joint issuance of debt, even in emergencies.

Report by Jan Strupczewski, Michelle Martin, Gabriela Baczynska, Toby Sterling, Joseph Nasr and Francois Murphy; Editing by Catherine Evans, Nick Macfie and Pravin Char

Our standards:Principles of the Thomson Reuters Trust.

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