Italy and others seek EU-backed ‘coronabonds’ to lift member states out of recession

This article is more than 5 months old

This article is more than 5 months old

European leaders have clashed over how to pull their economies through the coronavirus crisis, as Italy accused other member states of a timid response to an unprecedented economic shock.

Meeting via a video link, the EU’s 27 leaders papered over deep divisions by agreeing that another fortnight was needed to discuss ambitious economic recovery plans. After a testy debate over “coronabonds”, i.e raising funds through issuing shared European debt, the bloc kicked a decision down the road, by calling on EU finance leaders to present proposals within two weeks.

Even as the virtual summit was still ongoing, Italy’s prime minister, Giuseppe Conte, released a statement rejecting an earlier pre-prepared draft statement because he thought it was a weak response to the scale of the crisis.

Hours before the summit, Conte called for “extraordinary and exceptional measures” to help Europe’s battered economies deal with a sharp downturn and the expected surge in joblessness resulting from coronavirus.

Backed by France, Spain and seven other eurozone countries, Italy wants a “European recovery bond” or “coronabonds” – namely, EU-backed debt to lift member states out of a recession and increase spending on healthcare.

But the idea of shared debt remains anathema to Germany, Austria and the Netherlands, who shunned the similar concept of “eurobonds” during the eurozone crisis a few years earlier.

In a video conference summit – their third in as many weeks – talks ran four hours over schedule as leaders sparred over a single paragraph in the communiqué about how best to aid their economies.

Italy struggled to convince citizens of coronavirus crisis. What can Europe learn? Read more

After the meeting, Charles Michel, the head of the European council, told journalists the EU was ready to do “everything it takes in order to find the right solution” and needed to continue work with the 19 finance ministers of the eurozone. “We had tonight a very strong political debate. It was a useful debate, it was a necessary debate,” he said.

But hope of a breakthrough remain elusive, as eurozone finance ministers earlier this week failed to agree on common European debt – passing the issue to Thursday’s EU leader meeting.

With Italy’s economy on a downward spiral as a result of the lockdown to fight the outbreak, Conte unveiled a second stimulus package worth more than the €25bn package ($27.43bn) adopted in March. But the extra spending will send the government shooting over budget deficit targets.

EU leaders, however, were able to unite over the idea of more careful screening of foreign investment to protect Europe’s “strategic assets”. The decision comes days after the German government said it had rejected a bid from the Donald Trump administration to buy a German medical company working on a Covid-19 vaccine.

The bloc also said it was prioritising the search for a vaccine for all in need “without geographical barriers”, vowing to increase funding for research.

EU leaders also agreed to set up “a more ambitious and wide-ranging crisis management system within the EU”. The EU already has an emergency response coordination centre, which operates 24/7 and can organise help, if asked, when any country in the world suffers an earthquake, forest fire, floods or pandemic.

Earlier in the day, the European commission president, Ursula von der Leyen, rebuked member states for “looking out for themselves” during the early phases of the crisis.

Taking an unusually critical tone, she said the story of the past few weeks had been partly a painful one.

“When Europe really needed an all-for-one spirit, too many initially gave an only-for-me response. And when Europe really needed to prove that this is not only a fair weather union, too many initially refused to share their umbrella,” she told members of the European parliament in a sparsely-attended session in Brussels to vote through emergency measures.

MEPs were advised to stay away and given the right to vote electronically for the first time.

Von der Leyen was referring to export bans on critical medical goods, as well as the closure of borders, which have created massive delays in moving food and healthcare supplies around the bloc.

She went on to say, however, that Europe was now “stepping up”, pointing to Germany’s decision to bring French and Italian patients to German hospitals, as well as a similar help from Luxembourg to France.

The commission also released statistics on Twitter stating that France and Germany combined had donated more surgical masks to Italy than China.

EU leaders are increasingly worried they are losing “the battle of narratives”, after Russia and China rushed to aid Italy, while European neighbours failed initially to respond to Rome’s calls for help. The EU’s chief diplomat, Josep Borrell, wrote earlier this week that there was “a struggle for influence through spinning” of “the politics of generosity”.

But an internal report by Von der Leyen’s team underscored concern about the patchwork of national responses. The document lamented that transport had been paralysed by border closures, leading to lorries being stuck in queues at EU internal borders for 24 hours, with problems most acute in central Europe. So far, only three countries have followed the commission’s advice to create “green lanes” (minimal checks) to speed up the traffic.

On the day when the EU marked the 25th anniversary of the entry into force of the border-free travel zone, every EU member state barring Ireland had closed or put restrictions on their border. “A crisis without borders cannot be resolved by putting barriers between us and yet this is exactly the first reflex that many European countries have,” Von der Leyen said.