European governments failed to agree in all-night talks on more support for their coronavirus-hit economies, breaking off a meeting of finance officials who clashed over aid conditions and a proposal to borrow together to pay for the health crisis.
Finance ministers from the 19 countries that use the euro spoke via videoconference and postponed their news conference until Thursday after a meeting that started Tuesday ran late into the night.
Diplomatic sources and officials said a feud between Italy and the Netherlands over what conditions should be attached to eurozone credit for governments fighting the pandemic was blocking progress on half a trillion euros worth of aid.
“After 16 hours of discussions we came close to a deal, but we are not there yet,” Eurogroup Chairman Mario Centeno said. “I suspended the Eurogroup, and (we will) continue tomorrow.”
The finance ministers, who started talks at 2:30 p.m. GMT on Tuesday that lasted all night with numerous breaks to allow for bilateral negotiations, are trying to agree on a package of measures to help governments, companies and individuals.
They had hoped to agree on a half-trillion-euro program to cushion the economic slump and finance recovery from the pandemic and turn a page on divisions that have marred relations as the bloc struggles with the outbreak.
But feuds emerged prominently again, one diplomatic source said: “The Italians want a reference to debt mutualization as a possible recovery instrument to be analyzed more in the future. The Dutch say ‘no.’”
An official who participated in the talks said at around 4 a.m. GMT on Wednesday, The Hague was the only one refusing to endorse a text that the ministers were expected to agree on to get endorsement for a new set of economic measures from the bloc’s 27 national leaders.
“In this difficult hour, Europe must stand together closely. Together with (French Finance Minister) Bruno Le Maire, I, therefore, call on all euro countries not to refuse to resolve these difficult financial issues and to facilitate a good compromise – for all citizens,” German Finance Minister Olaf Scholz said on Twitter.
Spanish officials warned Wednesday the European Union's future is in jeopardy if it cannot come up with a joint financial response to combat the outbreak.
Government spokeswoman Maria Jesus Montero said Europeans will begin to lose trust in the EU if it does not act together in the crisis, which she compared to World War II.
"We need the help of other countries, and that's why the European community was originally formed, at that time after a physical war. Now, we are fighting a war against an epidemic," she said in an interview on Antena 3 TV channel.
Agriculture Minister Luis Planas echoed that concern. "This is a crucial issue on which the European Union's future is at stake," he told Sur Radio station.
However, both also said they were optimistic further negotiations would eventually yield positive results. "My take is that even though it may take a lot of time and a lot of meetings, we'll reach a positive agreement," Planas said.
ECB urges measures worth $1.6 trillion
An ECB spokesman declined to comment.
In a videoconference meeting, the EU Commission estimated that the bloc's economy could shrink by 10% this year, officials said.
The EU support would back up national measures, but the overall fiscal effort may not be enough to meet total financing needs, the officials said.
In the meeting France, Italy and Spain said the European effort to tackle the crisis should be well above 1 trillion euros this year, officials said, in line with the ECB estimate of financing needs of 1 trillion euros to 1.5 trillion euros.
Issuing joint debt has been a battle line between economically ailing southern countries like Spain and Italy and the fiscally frugal north, led by Germany and the Netherlands, since the financial and eurozone crises began over a decade ago.
'Shame on Europe'
To support economies burdened by coronavirus lockdowns, the EU has already suspended state aid limits and allowed member states to inflate their debt to spend more.
But Spain, France and Italy say that is not enough and have cast the discussion about more support as an existential test of solidarity that could make or break the EU.
Further proposals under discussions include credit lines from the eurozone bailout fund that would be worth up to 2% of a country’s economic output, or 240 billion euros in total. The conditions for gaining access to this money remain a sticking point.
Granting the European Investment Bank 25 billion euros of extra guarantees so it can step up lending to companies by a further 200 billion euros is another option.
The third is support for the EU executive’s plan to raise 100 billion euros on the market against 25 billion euros of guarantees from all governments in the bloc to subsidize wages so that firms can cut working hours rather than sack people.
Creating an emergency support fund issuing grants for medical supplies and health care is another idea, as is a French proposal to create a joint EU solidarity fund to finance long-term recovery.
If they do eventually agree, the combined pan-EU and national government responses could add up to the biggest fiscal support program in the world, surpassing that of the United States, Reuters calculations showed.
While the EU is no stranger to protracted horse-trading, the discussion exposes rifts in the bloc and further strains its unity, already damaged by the eurozone crisis and the 2015-16 migration crisis, which partly contributed to Brexit.
So far the ministers, discussing via videoconference through the night with some of them dozing off at times, according to officials present, have been left frustrated.
Le Maire was quoted as saying at one point during the night, according to one official who participated: “Shame on you, shame on Europe. Stop this clownesque show.”
