European Union talks for coronavirus rescue package stall after 16 hours

European Union talks for coronavirus rescue package stall after 16 hours

European Union talks for coronavirus rescue package stall after 16 hours

EU finance ministers are to meet by video conference to discuss an economic rescue plan for European countries worst hit by the coronavirus pandemic.

"I suspended the Eurogroup and (we will) continue tomorrow Thursday", said Eurogroup chairman Mario Centeno, who is the Portuguese finance minister.

"It's a big challenge to the existence of Europe", Italy's Prime Minister Giuseppe Conte told the BBC.

"ESM is not an appropriate instrument for this crisis in dimensions and nature", Italian Finance Minister Roberto Gualtieri said before Thursday's call.

Estimated to bring the EU's total fiscal response to the epidemic to €3.2 trillion, the package has controversial elements that laid bare the deep divisions among European Union countries in their approach to financial burden- sharing amid the pandemic.

But the Netherlands went further, with Finance Minister Wopke Hoekstra demanding "certain economic conditions", tailored to individual member states, sources said - a demand rejected by countries such as Italy in particular.

A French official from the President Emmanuel Macron's office lambasted the Dutch position "incomprehensible", while German Economy Minister Peter Altmaier said France and Germany would do their utmost to accelerate the talks.

"After 16h of discussions we came close to a deal but we are not there yet".

The package under discussion would bring the EU's total fiscal response to the epidemic to 3.2 trillion euros ($3.5 trillion), the biggest in the world.

The debate over debt mutualization, risk and burden sharing, echoes the divisions that nearly tore the European Union apart during the sovereign debt crisis nearly a decade ago.

Diplomats signalled that talks faltered on how to use the so-called European Stability Mechanism (ESM) bailout fund to help countries.

Italy and most other countries are ready to accept very light conditions, but the Netherlands wants stricter rules, including country-specific economic criteria, which is politically unacceptable for Rome.

Also under discussion is a guarantee fund from the European Investment Bank for business liquidity and EU support, which would pay the wages of workers who would otherwise be laid off by struggling firms.

This is sometimes called "coronabonds" and Netherlands' opposition is shared by Germany, Austria, Finland, Sweden and others.

To help economies burdened by coronavirus lockdowns, the European Union has already suspended state assist limits and allowed member states to inflate their debt to spend extra.

Another controversial element - championed by Italy, Spain and France - is the demand for common debt issuance, frequently referred to as coronabonds, as a tool to overcome the major economic contraction anticipated across the bloc this year.

The ministers might end up sidestepping the problem by just mentioning the need for a recovery fund and asking the 27 national leaders of the bloc to decide on how to finance it.

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