The third virtual European summit in two weeks was trying this Thursday to agree on a joint declaration for a “coordinated strategy” that will restore the continent's social, economic and industrial normality once the pandemic has been overcome. But the division between the partners over the dimension, the instruments, and the start of that shock plan kept that unanimous statement in the air last night. Italy, annoyed with the shyness of the outlined plan, threatened to distance itself from the text and condemn the summit to a failure that would cast doubt on the EU's ability to jointly react to the biggest health crisis in its history.
The summit started with a draft declaration that was limited to announcing a future “roadmap for an action plan” that will restore vigor to the European economy. The only concrete measure in the short term was the request to the ministers of economy of the euro area to finish off a kind of safety net that could allow countries in difficulty to access an emergency credit line from the European Stability Mechanism ( Mede), which has a capacity of up to 410,000 million euros. But that reference to the European rescue fund, the use of which evokes the dangerous stigma of the countries rescued during the financial crisis, encouraged Italian Prime Minister Giuseppe Conte, who refuses to use an instrument designed for debt crisis.
Conte struck the table and imposed a period of 10 days on the rest of the EU's partners to seek a solution to the serious health, social and economic crisis that the entire South is now experiencing. According to the Italians, President Pedro Sánchez endorsed Conte's order. The resistance of Italy, which leads the group of nine countries that demand more ambition (including France and Spain), left the outcome of the summit in the air last night. Diplomatic sources did not rule out that the end result was a mere statement by the President of the Council, Charles Michel, as already happened during the two videoconferences held since the start of the coronavirus crisis.
The initial declaration project had been the result of several days of diplomatic haggling, in which the most cautious theses of the most fiscally orthodox countries were imposed, with Germany and the Netherlands at the forefront.
The alliance orchestrated on the eve of the summit by nine party countries to respond to the crisis with a shared debt instrument that alleviates the enormous bill that several European states will have to face served little.
This most ambitious group, in which Italy, Spain and France are members, represents almost half of the EU population. But the scale that matters in Berlin or The Hague is that of the red numbers. And the nine allied countries represent 72% of the public debt of the euro zone. Only Italy accumulates outstanding debts (2.38 trillion in 2019) that almost equal those of Germany and the Netherlands together (2.47 trillion). From the countries of the North iron was removed before the summit to the letter that those nine States sent to Michel to demand the mutualisation of the costs of this pandemic. “It is a letter signed by nine of the 27 partners before a Council. Okay, it is within normality, “said diplomatic sources.
The German government of Angela Merkel and the Dutch of Mark Rutte refuse to use community resources at this start of the crisis. Both countries, supported by Austria and Finland among others, prefer that the national route be exploited initially, taking advantage of the temporary suspension of the Stability and Growth Pact (which set a limit of 3% of the public deficit) and the relaxation of the rules of State aid (which limited subsidies to companies in difficulty).
These two measures approved so far, however, benefit community partners asymmetrically, because they can only be exploited by countries with ample fiscal room for maneuver, such as Germany and the Netherlands. Those who are in the red (such as Spain) and with a debt volume close to 100% of GDP (such as Spain and France) or above 100% (such as Italy or Portugal) hardly have the budgetary space to embark on a large fiscal stimulus plan charged to public coffers.
Money with conditions
Dutch Finance Minister Wopke Hoekstra has even suggested in videoconference meetings with his counterparts that the European Commission should investigate why some countries do not have such a budget margin despite the fact that the euro area has been growing for seven years uninterrupted, the longest period of bonanza since the birth of the single currency in 1999.
The hawks They would contemplate the use of the Mede in the future, if the respite that the European Central Bank has given ends up running out. But those programs, in his opinion, should be subject to a conditionality similar to that of a financial rescue, something to which Italy and Spain refuse. First, because of the stigma that would apply to the country that asked for it and, second, because they believe that accessing a loan should have no other condition than attending to the emergency. And they go further: they ask to share the costs.
“The problem is that the coronavirus crisis has not yet hit all countries symmetrically,” says a southern diplomatic source. The countries of the South are convinced that the brutal impact will end up being felt throughout the EU. And then the time will come to agree a large stimulus plan at the European level, described by President Sánchez as the Marshall Plan.