The Coronavirus is shaking up EU rules, including budgetary ones. Yesterday the European Commission took the bull by the horns and decided to suspend the Stability Pact in order to give the economies of the various European states all the liquidity they need to face an unprecedented emergency against an invisible monster like Covid -19 and tame the “severe recession ahead”.
After the ECB's bazooka which is ready to make all the money needed available to central banks and their respective economies until the end of the emergency, yesterday's is another sign that Europe, after the initial uncertainties and despite the reluctance of Germany and Holland, finally moves.
"Now pump all the necessary money into the economy," President Ursula von der Leyen said bluntly, urging governments to do their part.
With the suspension of the Stability Pact, EU countries will thus be able to spend what is necessary and go beyond the threshold of 3% of GDP to finance health services, businesses and social safety nets for workers, without incurring penalties and the consequent condemnation of markets, even if the Commission has reminded everyone that spending freedom "must not jeopardize budgetary sustainability".
“We are taking an unprecedented step” commented the European Commissioner for the Economy, Paolo Gentiloni. But that's not all, because within the EU and between the various governments the proposal made at the last summit by the Italian premier Giuseppe Conte and the French president Emanuel Macron to activate immediately - and without conditions - the 410 billion euros of the Month , the State-saving Fund, and to launch Eurobonds to support the economy paralyzed by the Coronavirus and heading towards a very heavy recession.
Germany has not yet decided what to do with the MES and Eurobonds, but another opening came from von der Leyen yesterday when he said: "If structured in the right world, we will adopt them"
However, the match is still ongoing and yesterday Germany, Holland and Finland made it known that they are willing to grant the go-ahead for the use of the Mes, provided however that those funds are used only to fight the Coronavirus. But Italy and France do not want conditions that are too strong so as not to give the markets a feeling of weakness and not to curb the economy with new forms of austerity. However, the compromise could be reached on a light conditionality to give the green light to access to Mes funds.
