La European Commission is preparing a 100 billion euro plan to help European governments plug the bleeding unemployment caused by the coronavirus emergency. The proposal – signed by the Commissioner for Economic Affairs, Paolo Gentiloni – will be presented by Friday and will arrive on the Eurogroup table next week. It will therefore be the finance ministers of the Eurozone who will have to evaluate it and then submit it to the European Council, which will meet on Thursday next week (for the fourth time in five weeks).
The idea is to deliver European support for national social safety nets of the economies hardest hit by the recession. To find resources, start with funds left in the European budget, which will then be increased on the market with an issue of securities. The goal is to put together a sum between 80 and 100 billion to be distributed among the governments of the Eurozone as needed, or on the basis of the violence with which the pandemic has hit each country.
Unlike what is currently foreseen for the funds in the belly of the ESM State-saving Fund (which, however, are many more: around 410 billion), this money would be lent without any conditions: no austerity pact with the EU Troika, no corrective measures on the horizon. More, deadlines would be long and interest rates particularly advantageous.
In reality, the debate on this safety net against unemployment is nothing new: it has been talked about for years and in the past the idea was strongly supported by the former Italian Treasury Minister, Pier Carlo Padoan. But now, with the crisis spreading and the Northern Front refusing any concessions both on the Mes and on the Eurobonds, at least this deal seems to be within reach.
Furthermore, a draft agreement could also arrive on the table of the Eurogroup to allow the European Investment Bank to increase its capacity by 240 billion to finance projects to support the recovery. In this case, the plan is to set up a 25 billion guarantee fund thanks to guarantees from EU governments. At that point, the EIB, on the strength of its triple A rating, will issue securities to raise up to 75 billion on the market.
The European Commission and the ECB will then issue bonds. However, it will not be a question of real Eurobonds (nor of Coronabonds), which would be able to attract much higher loans (over one thousand billion) and to make a change in the fight against the crisis, as Italy, France and Spain are asking.
In an intervention published in "La Repubblica", the president of the European Commission, Ursula von der Leyen, writes that “the hardest hit country, Italy, has also become the greatest source of inspiration for us all” and that “only solidarity can make us emerge from this crisis, that between people as well as that between States”.
The number one of the European Executive apologizes to our country, saying that "today Europe is mobilizing alongside Italy", even if "unfortunately it was not always like this", because "we must recognize that in the early days of the crisis, faced with the need for a common European response, too many have thought only of the problems of their own home".
Von der Leyen ensures, however, that now "Europe has changed pace”, so much so as to want to “lend a hand, allocating new resources to finance layoffs: up to one hundred billion euros in favor of the countries hit hardest, starting with Italy, to compensate for the reduction in salaries of those who work with reduced hours. This will be possible thanks to loans guaranteed by all Member States, thus demonstrating true European solidarity”.
In a subsequent speech, von der Leyen added that “to date the EU, ie the European institutions and the member states, have mobilized 2.770 billion euros. This is the largest financial response to a European crisis ever given in history. I hear many calling for a new Marshall Plan: the Union budget should be our Marshall Plan."
