Virtual summit, real acrimony: EU leaders clash
over ‘corona bonds’
Push by Italy and Spain for new financial instruments
faces resistance from Germany and the Netherlands.
By DAVID M.
HERSZENHORN, JACOPO BARIGAZZI AND RYM MOMTAZ 3/27/20, 2:26 AM CET Updated
3/27/20, 7:25 AM CET
The summit was virtual; the anger and disagreement
among EU leaders was very real.
For Italy,
the test of EU solidarity in responding to the coronavirus crisis came down to
a simple point: Your bond is your word.
But EU
heads of state and government failed Rome's test during a videoconference on
Thursday by refusing to back the idea of "corona bonds" — a common
debt instrument to help finance the response to the coronavirus pandemic, which
has claimed thousands of lives across Europe in recent weeks and put the
Continent on virtual lockdown.
The dispute
took EU leaders to the edge of a political debacle, with a complete breakdown
averted only through an agreement brokered by European Council President
Charles Michel for leaders to return to the debate in two weeks, when they will
consider formal proposals from eurozone finance ministers.
Still, the
leaders' meeting, which was intended to showcase the bloc's unity, instead highlighted
bitter divisions, fueled by lingering resentment over the handling of the
eurozone debt crisis a decade ago, and by more recent and raw fury over the
initial unwillingness of other EU capitals to come to Italy's aid with medical
equipment.
Italian
Prime Minister Giuseppe Conte, furious about adamant opposition to the corona
bonds concept by the Netherlands and Germany, upended the videoconference by
declaring that he would not support the leaders' concluding statement.
"We
need to react with innovative financial tools," Conte told his
counterparts, according to an Italian official. Conte issued an ultimatum
giving officials in Brussels 10 days to come back with "an adequate
solution."
"If we
don’t propose now a unified, powerful and effective response to this economic
crisis, not only the impact will be tougher, but its effects will last longer
and we will be putting at risk the entire European project," Sánchez said,
according to a statement issued by his office. "The same mistakes of the
financial crisis of 2008 — which sowed the seeds of disaffection and division
with the European project, and provoked the rise of populism — cannot be made.
We must learn that lesson."
As a result
of the interventions by Conte and Sánchez, which one senior EU official called
"emotional," the videoconference dragged on three hours longer than
expected as Michel worked frantically to preserve the joint statement.
Ultimately, he succeeded with a series of tweaks that only officials
highly-attuned to Brussels bureaucratese could understand.
In one
paragraph, for example, a call for a "proposal" from the Eurogroup
finance ministers became a call for "proposals" plural — a change
that in the view of the Italians means that the corona bonds are still on the
table.
Officials
and diplomats said Michel had convinced Conte and Sánchez to stay on board in
part by focusing on a closing paragraph in the joint statement that focused on
looking ahead toward recovery from the crisis.
'We should
however start to prepare the measures necessary to get back to a normal
functioning of our societies and economies and to sustainable growth," it
says. "This will require a coordinated exit strategy, a comprehensive
recovery plan and unprecedented investment. We invite the President of the
Commission and the President of the European Council, in consultation with
other institutions, especially the [European Central Bank] ECB, to start work
on a Roadmap accompanied by an Action Plan to this end."
The fight
over financing instruments overshadowed an array of other steps that EU leaders
have taken in recent weeks to strengthen the overall response to the pandemic,
including new joint procurement measures for essential medical equipment; a 30-day
ban on non-essential travelers from outside the EU; and better coordination
over internal border restrictions.
After a
rocky start, EU countries are not only helping each other obtain necessary
equipment, but in some cases even welcoming sick patients across borders.
Extraordinary
meetings
The EU
leaders' meeting was just one of several remarkable events on Thursday that
showed the world grappling with the pandemic, and government institutions
struggling to function amid unprecedented restrictions on travel and large
meetings. The European Parliament held a virtual plenary session with remote
voting on Thursday morning, and earlier on Thursday afternoon, G20 leaders held
a videoconference to discuss their own collective response to the crisis.
Healthcare
workers attend to patients in the intensive care unit of the Poliambulanza
hospital in Brescia, Italy during the COVID-19 pandemic, 26 March 2020 |
EPA-EFE/Filippo Venezia
Despite the
dispute over the corona bonds idea, the EU and its member countries have
reacted aggressively to the economic fallout from the pandemic, for example, by
declaring a general waiver of rules that limit how much EU countries can
borrow, and swiftly granting exceptions to state-aid regulations so capitals
can assist ailing industries and companies. In addition, the European Central
Bank has pledged to unleash €750 billion to prop up the battered economy.
But there
were clear signs earlier this week that the EU leaders' videoconference could
be headed for a disastrous result.
On the eve
of the virtual summit, nine countries, including Italy, Spain and France, sent
a letter to Michel urging a more collective economic response by the EU,
including a specific reference to common debt instruments — in other words,
corona bonds.
"In
particular, we need to work on a common debt instrument issued by a European
institution to raise funds on the market on the same basis and to the benefits
of all Member States, thus ensuring stable long term financing for the policies
required to counter the damages caused by this pandemic," the nine leaders
wrote. "The case for such a common instrument is strong, since we are all
facing a symmetric external shock, for which no country bears responsibility,
but whose negative consequences are endured by all."
Some
officials and diplomats acknowledged that leaders had done little more than
postpone the fight on Thursday evening.
"We
will have to meet again to have this political debate," a French official
said, "and we know it’s going to be a difficult debate."
"There
are different visions on what financial solidarity should be, but at least we
all agreed on the need to examine the question and the urgency of the
question," the French official added.
"We
have to differentiate between the theater of the moment and the reality of the
debate," the official said. "The Italians may have wanted to
dramatize things a bit. I understand it. It’s part of their narrative but it
doesn’t reflect the substance of the debate. We actually have a vision that is pretty
aligned with the countries that want to push the European project and
solidarity pretty far."
Still, the
French official said that President Emmanuel Macron believed that the crisis
was a test for EU solidarity and that the bloc's future hinged on delivering it
in this time of need.
German
Chancellor Angela Merkel, however, made clear her view that corona bonds should
not be part of Europe's response.
“You are
aware of the letters from some member states who have imagined or are imagining
corona bonds,” Merkel told reporters. “We have said from both the German and
other sides that this is not ... the view of all EU countries.”
Merkel said
she preferred an alternative plan to use the European Stability Mechanism
(ESM), which was created in 2012 to help eurozone countries in serious
financial distress. "With the ESM we have a crisis instrument that opens
up many possibilities for us that do not call into question the basic
principles of our common and responsible action," she said.
Dutch Prime
Minister Mark Rutte has been firm in his country's opposition to the corona
bonds, and Austrian Chancellor Sebastian Kurz and Finnish Prime Minister Sanna
Marin also spoke out against the idea.
“There’s
still a great disagreement in Europe about the long-term” economic response to
the crisis, Rutte told reporters on Thursday.
Asked at a
news conference following the leaders' meeting to clarify what had been
decided, Michel said that the heads of state and government had tasked the
Eurogroup with putting forward ideas, including use of the ESM. But he said
that in his view there was crucial agreement on the need for a forceful
response.
"The
Eurogroup has started to discuss different proposals, the ESM included and we
have asked the Eurogroup to continue and make some proposals within two
weeks," Michel said. "The important signal is based on the fact that
each member state, we recognize that this crisis is exceptional, is unique and
it requires a very strong answer."
Lili Bayer,
Maïa de la Baume, Hans von der Burchard and Cristina Gallardo contributed
reporting
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