European Union finance ministers have agreed to an economic recovery plan for the coronavirus crisis that France’s minister said implicitly opens the door to jointly issued debt and which he hailed as a French success.
The agreement was reached only after Germany and France overcame opposition from the Netherlands to the crisis plan during marathon talks.
The final agreement avoids an explicit mention of jointly issued debt, which was anathema to the Dutch, but French Finance Minister Bruno Le Maire said it was there implicitly.
Le Maire told reporters after talks with his euro zone counterparts that European Union member states had agreed to mobilise a total 1 trillion euros ($1.09 trillion).
Half of that amount would be made available in the short term and the rest would come from a new joint recovery fund, which France had set as its pre-condition for its approval of the overall package.
Though the fund’s details remain to be negotiated over the coming months, Le Maire said the final agreement implied that it would be financed with joint debt as there was no other way to finance long-term economic reconstruction.
“Who’s going to raise the debt? There’s a lot of uncertainty that remains to be determined. But I have a firm conviction that the fund will see the light of day and there will be debt raised jointly in a form that remains to be determined,” Le Maire said.
He added that the agreement document’s reference to innovative financial instruments, which was the subject of negotiations during 15 hours, opened the door for the first time to jointly issued debt.
“It means what it means. The only instrument that does not yet exist in European financing is joint debt,” Le Maire said.
He insisted that the new joint debt did not amount to eurobonds – abhorred by the Dutch and other northern European governments – because it would be used to finance future spending to jumpstart countries’ economies and not past profligacy.
Countries would be able to tap into the fund based on how much they were hit by the coronavirus crisis, but contributions to it would depend on the size of their economies, which meant Italy and Spain would stand to benefit, Le Maire said.
He said that the fund should be available within six months, and that though the total amount remained to be defined, 500 billion euros seemed reasonable.
($1 = 0.9205 euros)