ANOTHER eurozone crisis could be on the cards after finance ministers failed to reach an agreement on the joint debt, also known as corona bonds, at Thursday’s teleconference meeting of the Eurogroup. While there was a joint statement and the go-ahead to a €540bn package of measures for dealing with the devastating consequences of the coronavirus on the bloc’s economy, there was no decision on the pooling of EU debt, as Italy and Spain, the worst-hit countries, had been seeking.
The vague wording of the statement made no mention of the corona bonds, referring instead to a recovery fund that would provide funds to countries through the EU budget to assist the recovery of the European economy. The governments in Rome and Madrid had argued for the issue of a corona bond by the ECB that would finance the recovery of eurozone countries, while keeping their borrowing costs down, but this does not have the support of the financially prudent countries of the north such as Germany, The Netherlands, Austria and others.
The matter was discussed inconclusively the previous week at the summit of European leaders, who instructed their finance ministers to find a way out of the deadlock this week. After three days of talks leading up to Thursday night’s meeting, the result was the vague statement which the Italian finance minister saw as proof that “European bonds are on the table.” Leaders will sign off on the deal announced next week, but despite the optimism of the Italian minister, it is highly unlikely the issuing of a joint eurozone debt would be approved.
Dutch foreign minister Wopke Hoekstra, was quoted by Politico as saying after the meeting, that he “will never be OK with Eurobonds,” because “it is my deeply held conviction that it is not only unfair to the Dutch taxpayer but it will increase rather than decrease risks for the Union as a whole.” It is the same dispute that surfaced during the eurozone crisis. The financially prudent northern European states were unwilling to bankroll the profligate states of the European south. The Italian economy’s problems predated the coronavirus, its public debt at 134.8 per cent of GDP.
Whereas the northern countries want to protect their taxpayers who could end up paying off the debts of the southern countries, the latter, understandably demand a show of solidarity in these testing times. Both have a point, but they cannot both get their way. Whatever the final decision, it would cause new divisions and pose a bigger threat to Union’s future than ever before. Former European Commission president Jacques Delors went as far as to say last weekend that the lack of solidarity “poses a mortal danger to the EU.”