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April 9, 2020

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Europe feuds over aid package

EUROPEAN governments remained at loggerheads yesterday over measures to help the economy weather the coronavirus outbreak, breaking off a meeting of finance officials who clashed over aid conditions and proposals to borrow together to pay for the health crisis.

Finance ministers from the 19 countries that use the euro haggled into the night for 16 hours by videoconference since Tuesday. The meeting, described by France’s finance minister as “long and difficult,” ended without a deal. It is set to resume today.

On the table is a three-part package amounting to around a half-trillion euros (US$550 billion). It consists of up to 240 billion euros in emergency loans from the eurozone’s standing bailout fund, credit guarantees from the European Investment Bank to keep companies afloat, and support for short-work schemes that help companies avoid layoffs during what is hoped are temporary business interruptions.

Italy has rejected using the bailout fund, the European Stability Mechanism. One reason is that the money is supposed to come with conditions to carry out economic reforms, based on the fund’s original purpose as a bailout refuge for financially troubled countries. Italy argues that makes the fund the wrong tool since the virus is no country’s fault. Prime Minister Giuseppe Conte has dismissed the bailout fund as “totally inadequate.” Germany has proposed waiving most conditions on the money, but the Netherlands has pushed for requiring reform promises.

German Finance Minister Olaf Scholz said he and his peers were close to a deal on the bailout loans, company support and short-work schemes.

“We are mostly in agreement but not quite all the way,” he said, citing the need for unanimity over conditions for the ESM loans and that he expected agreement before the end of the week.

Italy, backed by France, Spain and six other countries, had pushed to go even farther than using the ESM and rely on a one-time shared bond issue backed by all countries to raise money at low interest rates and favorable conditions such as long repayment.


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