German Chancellor Angela Merkel backed on Monday the issuance of EU bonds and the use of a bigger EU budget to finance the bloc’s economic recovery from the Coronavirus crisis, but remained sceptical towards issuing the so-called Coronabonds, that Southern European countries are pursuing.
“We have already found an instrument in Article 122, paragraph 2 [of EU treaty], where bonds for countries can be passed on by means of guarantees from member states and then used, for example, to finance short-time working allowances,” Merkel said.
“Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned, paragraph 2 of EU Treaty reads.
The German Chancellor rejected the idea of coronabonds, citing that it would take too much time until they are set up, but pledged its support to the countries that seek their issuance, as those are the worst-hit by the Covid-19 pandemic.
“I would like to say that Germany not only wants to act in solidarity, but that it will act in solidarity,” Merkel added, insisting that this act has to happen within the rules of existing EU treaties. Yet, she also said that Germany remains open to amendments to EU treaties if this move facilitates measures to restore economies, warning, however, over possible process delays and adding that the EU will need “quick answers to address this pandemic.”
The German Chancellor almost echoed Ursula von der Leyen’s proposal to use already existing instruments for the salvation of EU economies. The EC President had touted an increase on Brussels’ demands concerning member-states’ contribution to the Multiannual Financial Framework 2021-2027, and then, the use of the so-called “headroom” for money leverage.
During the news conference, Merkel said that the bloc’s long-term budget will look very different and bigger than what was discussed prior to the Coronavirus outbreak, as EU leaders had failed to reach a compromise during February’s emergency summit.
Merkel’s comments followed a joint phone call on Monday evening with the leaders of France, Italy, Spain, the Netherlands, and the Presidents of EU Commission and Council, a diplomat told Reuters. A videoconference among EU leaders is earmarked for April 23, in a bid to bridge their differences over the mechanisms to salvage EU economies from the pandemic crisis.
On April 9, Eurogroup agreed to the use of the European Stability Mechanism’s (ESM) credit lines, the Commission’s SURE mechanism to support workers and the European Investment Bank’s (EIB) enhanced lending capacity for businesses and particular SMEs. A recovery fund will also be created, that will be available as soon as the recovery starts.
While the issuance of Coronabonds was not included in Eurogroup’s draft document, Mário Centeno, the Portuguese Finance Minister and President of Eurogroup said in an interview given to Italian newspaper Corriere della Sera on April 15, that coronabonds are still on the table.
