Germany ‘ready for European solidarity’ but won’t back ‘coronabonds’

The German government is "ready for European solidarity", Finance Minister Olaf Scholz said Tuesday, but he stopped short of backing jointly-issued "coronabonds" demanded by some southern EU nations to help them cope with the pandemic.

Germany 'ready for European solidarity' but won't back 'coronabonds'
Olaf Scholz on Tuesday in Munich. Photo: DPA

Any EU-wide measures must be “smartly done and well thought-through,” Scholz said.

“A series of decisions that have already been made make this possible,” he added, suggesting resources from the EU budget could be channelled to countries whose health systems or economies are struggling the most.

Scholz's statement comes a week before finance ministers from the 19-country eurozone hold a videoconference to forge a common economic response to the virus crisis.

Last week, a discussion between European Union heads of government revealed deep divisions between fiscally austere northern countries and more economically fragile southern ones such as Italy which want massive help but without fiscal strings attached.

Italy, Spain, France and six other eurozone states last week called for an “instrument” to be created allowing a common eurozone bond issue, sometimes called “coronabonds”.

READ ALSO: What's the latest on coronavirus in Germany and what do I need to know?

The appeal was followed up Tuesday by a full-page advert in German daily Frankfurter Allgemeine Zeitung from Italian politicians, including the premiers of the Emilia-Romagna and Liguria regions and mayors of towns like Venice and Bologna.

If the EU “does not prove now that it exists, it will cease to exist,” they wrote, urging Germany to make “the right decision” for the “joint issuance of eurobonds”.

Clash over 'coronabonds'

Jointly-issued debt has long been a hobby horse for indebted southern EU countries such as Italy, but is fiercely resisted by deficit-leery northern countries, especially Germany.

German Chancellor Angela Merkel said following last week's EU talks that Germany would not back coronabonds.

Fiscally conservative countries like Germany, Austria, the Netherlands and Finland would prefer to see money coming from the European Stability Mechanism (ESM) which offers loans to eurozone countries in difficulty – but usually with strings such as harsh economic reforms attached.

Italy and other highly-indebted nations also fear markets will baulk at the negative impression caused by seeking such assistance.

But ESM chief Klaus Regling told the Financial Times Tuesday that any ESM scheme would have “very limited conditions,” such as a commitment to spend the funds only on measures to fight the virus and associated economic effects.

He argued that a credit line from the ESM would be “reassuring for markets” rather than raise doubts about their creditworthiness.

Member comments

  1. So, as many suspected, for so long, when the going gets tough, the reality in the EU is that each country acts like a jackal to preserve their own interests. What this Virus has shown is that Germany calls the shots and there is no reason for the existence of the EU in its present form. After this virus has passed, the EU should be stripped of all powers except those that create an efficient trading mechanism. Even this nonsense of open borders and welcoming of illegal immigrants which contributed to the massive spread of Covid19 should be scrapped. The EU has proven to be a disaster for so many, as the elite have prospered.

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