The European Central calls for 1.5 trillion euros to tackle the economic crisis

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The European Central calls for 1.5 trillion euros to address the economic crisis, today, Thursday, April 9, 2020 09:06 am

The European finance ministers did not succeed in reaching an agreement after a long night of discussions on a recovery plan after the outbreak of the “Corona emerging” virus, as the northern countries are still opposed to the southern countries that call for an unprecedented financial effort in the form of joint debts.

While officials told Reuters that the European Central Bank informed the euro zone finance ministers that the bloc may need up to 1.5 trillion euros ($ 1.6 trillion) in financial measures to deal with the economic crisis caused by the Corona virus. A bank spokesman declined to comment.

The officials added that the European Union Commission said during a videoconference meeting that the economy of the bloc may shrink by an estimated 10% this year, but the ministers are still divided on how to support the economy and have failed to agree on a joint text.

Mario Centio, head of the Eurogroup which includes the European Union finance ministers, announced in a tweet to him on the social networking site «Twitter»: “It was decided to suspend the talks on Wednesday, to be resumed on Thursday … on our way to an agreement, but we have not reached it yet.” . He added: “My goal remains the same: a strong European safety net to face the consequences of Covid-19 (to protect workers, companies and countries) and embark on a broad recovery plan.”

The Market Watch website said that the failure to reach an agreement on ways to confront Corona reflects the size of differences between members of the European bloc on how to share the high economic cost of the crisis of the spread of Corona across the old continent, which has become the epicenter of the global spread of the disease.

The first European economic response is based on three axes that seem to have been initially approved by the ministers, including loans worth 240 billion euros from the euro zone bailout fund, a corporate guarantee fund and partial unemployment support. But Italy – the country hardest hit by the epidemic (17,127 deaths) – and other countries in the eurozone are also calling for the creation of a “tool” that allows the 19 countries that have adopted the single currency to resort to joint borrowing, in the form of “Corona Bond” bonds. Among these countries, Spain, France, Greece, Malta, Luxembourg and Ireland, according to identical sources.

The officials who participated in the meeting, which ended yesterday (Wednesday), without agreement after 16-hour talks, said that Germany, the Netherlands and other countries in northern Europe were ready to support the European Union’s measures worth 500 billion euros.

They added that supporting the federation would strengthen national measures, but the overall financial effort may not be sufficient to meet all financial needs. The officials said that France, Italy and Spain said that financing the European effort to deal with the crisis should be much more than one trillion euros this year, which is in line with the European Central Bank’s estimate of financial needs of between one and 1.5 trillion. They added that no agreement had been reached, mainly due to opposition from the Netherlands and Italy.

Italy wants a more ambitious agreement with clearer signs of issuing a joint debt in the future, while the Netherlands is pushing for conditions for any credit line the union offers to countries that need it.

Rather than discussing a hypothetical common debt, northern European countries now prefer to focus on the tools that exist to deal with the economic shock, especially the European stability mechanism with 410 billion euros.

The European Stability Mechanism Fund was created in 2012 during the euro zone debt crisis to help countries lose the ability to borrow from global markets. The fund grants loans to a country that has difficulty of up to 2% of its gross domestic product, in exchange for a more specific compensation than usual … And Rome believes that this fund is “completely inappropriate”.

It is expected that the European Investment Bank will create a European guarantee fund, but its size should be discussed.

For his part, he proposes granting him 25 billion euros, through a guarantee provided by member states, in order to allocate an additional 200 billion euros to companies.

The ministers are also expected to endorse the European Commission’s plan to create a tool to ensure that about 100 billion euros are awarded for national partial unemployment plans that have been exacerbated by the epidemic. At a later stage, the proposals should be submitted to the heads of state and government of the European Union.

The leaders of the countries of the Union have given the finance ministers two weeks to set frameworks for an agreement on a package of economic measures that reduce the amount of damage caused by “Corona”, which expires on Thursday.

European finance ministers hope to crystallize a support plan that will provide about half a trillion euros to save the economies, provide cash for the afflicted companies, and support European governments facing financial difficulties.

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