France offers EU coronavirus rescue fund

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France pleads for a common European fund to help Europe get through the coronavirus crisis, but proposes to limit it to five or ten years and to focus on the economic recovery to counter German and Dutch objections to pooling debts .

“We are thinking of a fund that would be limited in time with the possibility of debt for a long-term response to the crisis,” said French Finance Minister Bruno Le Maire to the Financial Times. “It is absolutely essential to keep the door open to broad, long-term instruments that would allow us to face a” post-war “economic situation. “

Le Maire said the idea for the fund – which would be in addition to other multi-billion euro bailouts proposed or being negotiated by other EU and area institutions euro – stemmed from President Emmanuel Macron’s proposal for common “coronabonds” or “eurobonds” which was supported by eight other eurozone governments but rejected by others.

He said there was room for compromise at the next meetings of the 19 euro area countries and 27 EU members.

“We must not be obsessed with the word” coronabonds “or Eurobonds. We must be obsessed with the need for a very solid instrument to provide us with an economic recovery from the crisis.

“To have a fund for, say, five or 10 years – with a limited time – and with the possibility of having a common debt but only inside this fund, which could be more acceptable for other countries, could be a solution. “

France and its allies have already suggested using the next long-term EU budget, the so-called multiannual financial framework (MFF), on which discussions had already stalled before the coronavirus crisis, to provide long-term assistance to members such as Italy and Spain hard hit by the pandemic.

“While it is difficult for many Member States to have this possibility of contracting a common debt within the MFF, let us reflect on the same type of possibility outside the MFF for a limited period, with a clear emphasis on the recovery economic after the pandemic, “said Mr. Le Maire.

Crisis measures

The next package of crisis measures to be agreed by EU or euro area members should not come from the new fund or common bonds proposed by France, but from the existing European stability mechanism, which has a total of 410 billion euros. in lending capacity at its disposal.

Klaus Regling, CEO of ESM, said this week that it would take up to three years to set up a new European institution to emit coronabonds. ” [M]Member States must offer capital or guarantees, or allocate future income, “he said. “You can’t make connections out of thin air. “

Regling said the increase in short-term pooled debt issues should come from the MES, the European Investment Bank or the European Commission, which could issue more debt in the next seven-year MFF.

The fund proposed by Mr. Le Maire, said a French official, could “complement” the MFF and be managed like the MFF by the Commission.

Charles Michel, who heads the EU Council, said on Tuesday that it was “time to think outside the box” and that the EU budget “should be adjusted to this crisis”.

He declared after a videoconference with the heads of the commission, the European Central Bank and the Eurogroup: “The only way forward is a common strategy in a spirit of solidarity … To revive the European economy, we will have to use all levers available, at national and European level. “

Le Maire also called for aid to developing countries at risk of economic damage as a result of the pandemic.

France asked for a moratorium on bilateral payments of sovereign debt within the framework of the Paris Club, as well as swap lines to meet foreign exchange needs and a new IMF allocation of $ 500 billion in special drawing rights for developing countries. – Copyright The Financial Times Limited 2020

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