EU leaders have instructed their finance ministers to come up with plans to mitigate the economic fallout from the coronavirus epidemic, after failing to overcome divisions last month over whether to finance a response through joint borrowing .
Eurozone finance ministers to converge on Tuesday on three quick options to support the economy – the use of the European Stability Mechanism rescue fund, the European Investment Fund and the European Commission’s partial unemployment program .
“There is an agreement on the first three options, but that is not enough,” said French Finance Minister Bruno Le Maire before the meeting with his counterparts in the euro area.
The Mayor also proposed a fund of “several hundred billion euros” financed by joint loans which would be used to finance public spending for the economic recovery after the current crisis.
“I hope that tomorrow the door will be opened to include this type of instrument in the overall response we will give to heads of state for finance,” said Le Maire.
Northern European countries, including Austria, Denmark, Finland and the Netherlands, refuse to support an agreement that would authorize joint borrowing for fear that it would leave them hanging on to state debts most lavish of the south.
The Mayor hopes to overcome this opposition by proposing that the operation of the fund be limited to five to ten years and be strictly focused on financing the recovery.
He said it could be used for public spending in hospitals or to finance investments in sectors particularly affected by the downturn, such as automotive or aerospace, citing the example of the European aircraft manufacturer Airbus .
The fund would be structured as a special purpose vehicle holding resources from which countries could draw based on their suffering during the crisis. Contributions would be based on the size of each country’s economy.
This would mean that Italy, among the countries hardest hit in the world by the epidemic, would draw more from the fund than it paid for. (Report by Leigh Thomas; Writing by Matthieu Protard; Edition by Catherine Evans and Jan Harvey)