On Thursday, 9th April 2020, and after hours of talks, the EU finally reached a deal on a EUR 500 billion emergency rescue package, to stimulate the EU economy, in the midst of the coronavirus crisis, but failed to agree on the issuance of joint bonds (https://www.ft.com/content/b984101a-42b8-40db-9a92-6786aec2ba5c).
The Portuguese Finance Minister and President of the Eurogroup, Mr. Mario Centeno, stated in the video conference held, that “This proposal contains bold and ambitious proposals that would have been unthinkable just a few weeks ago” (https://www.euronews.com/2020/04/09/coronavirus-eurogroup-finance-ministers-agree-on-500-billion-emergency-fund).
The three core elements of the financial package include a revised pandemic credit lines from the European Stability Mechanism that will be available within two weeks, a boost to the lending of the European Investment Bank, and a new EUR 100 billion unemployment insurance scheme, that was proposed by the European Commission.
Specifically, the meeting endorsed a tool within the European Stability Mechanism, to open a credit line to the governments of member states, at 2 percent of the respective country’s gross domestic product, translating to about EUR 240 billion (http://global.chinadaily.com.cn/a/202004/10/WS5e8fb1e5a3105d50a3d15230.html).
Regarding the European Investment Bank, a pan-European guarantee fund will be created, which could support EUR 200 billion of financing for companies with a focus on small and medium-sized companies throughout the EU.
In relation to the unemployment insurance scheme – Support to mitigate Unemployment Risks in an Emergency (SURE) – it will allow for financial assistance up to EUR 100 billion in loans from the EU to the affected member states. The money will be used in public expenditure for the preservation of employment, acting as a second line of defense, supporting national short-time work schemes and similar measures.
It should be noted that prior to Thursday’s meeting, the EU finance ministers failed to reach an agreement on Tuesday, 7th April 2020, after a 14-hour meeting. The Ministers failed to break an impasse over the conditions attached to loans from the European Stability Mechanism, as the Dutch finance minister, Mr. Wopke Hoekstra, refused to back down from demands for tougher conditions being attached to the credit lines (https://www.ft.com/content/03eb9036-a557-4ab9-9ea5-edace5ea672b).
It is important to note that the EU on Thursday, left unresolved questions on how to pay for a later economic recovery plan for the bloc, and failed to reach an agreement on issuing joint bonds, known as “corona-bonds,” to issue joint debt, despite pleas from the leaders of Italy and Spain (https://www.nytimes.com/2020/04/09/world/europe/coronavirus-european-union-bailout.html?campaign_id=51&emc=edit_MBE_p_20200410&instance_id=17525&nl=morning-briefing®i_id=98329217§ion=topNews&segment_id=24581&te=1&user_id=f15a0ae8e539f5fa362ffb259c62dc15).