Eurogroup Fails to Reach Agreement on COVID-19 Economic Measures After 16-Hour Debate... "To Re-discuss on the 9th"

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Eurogroup, a consultative body of finance ministers from the Eurozone (19 countries using the euro), failed to reach an agreement on an economic stimulus package to address the economic impact caused by the novel coronavirus disease (COVID-19) after 16 hours of discussion.

According to Bloomberg and other sources on the 8th (local time), Mario Centeno, chairman of the Eurogroup, posted on his Twitter account, "The ministers have come close to an agreement, but no agreement has been reached yet." He added that further discussions are scheduled for the 9th. Chairman Centeno emphasized, "My goal is an EU safety net to respond to the economic slowdown caused by COVID-19," aiming to protect workers, businesses, and countries and to prepare a substantial economic recovery plan.

The Eurozone finance ministers held a video conference for a total of 16 hours from 4 p.m. the previous day until past midnight on the day, but ultimately failed to reach an agreement. This meeting was arranged after the EU's 27 member states' leaders gave a two-week deadline on March 26 to prepare economic measures to respond to COVID-19. As European countries have successively implemented movement restrictions to prevent the spread of COVID-19, the economic damage has increased, thereby increasing the need for urgent economic measures.

As expected, the meeting saw clashes between countries such as France, Italy, and Spain, which argue that the EU should actively inject finances into COVID-19 response, and countries like Germany and the Netherlands, which maintain a hawkish stance.

They are divided over the issue of issuing so-called "corona bonds," which refer to Eurozone joint bonds. The corona bond proposal is similar to the "Eurobond" concept raised during the 2010 Eurozone debt crisis. Eurobonds are bonds jointly issued by member states instead of individual government bonds issued separately by member states to share fiscal risks. During the Eurobond discussions, methods such as joint guarantees by member states were proposed, but the differences in positions among member states were too great, and no results were achieved.

In addition, it has been reported that options to utilize the European Stability Mechanism (ESM), the EU's permanent bailout fund, were also discussed. Initially, countries like Germany and the Netherlands opposed using this fund, but recent foreign media reports suggest they have shifted to a supportive stance. These fiscally sound countries have maintained the position that their governments should first expand fiscal spending to respond to COVID-19.

Bloomberg, citing sources, reported that the main reason for the failure to reach an agreement at the meeting was a clash of opinions between the Netherlands and Italy over the limit on the use of Europe's emergency bailout funds for COVID-19 response. It was also reported that there was a tense standoff over the wording related to the issuance of corona bonds in the joint statement draft.