Coronabonds: Germany urged to back joint EU debt to fight crisis

Coronabonds: Germany urged to back joint EU debt to fight crisis
Scholz speaking in Bavaria on Tuesday. Photo: DPA
Two European Commissioners urged Germany on Monday to agree to the European Union issuing joint debt to fight the coronavirus crisis, as wealthy northern nations remain reluctant to back so-called coronabonds.

“Like the European Central Bank in the monetary and financial sphere, the member states must now prove their joint decisive and innovative spirit,” internal market commissioner Thierry Breton and economy commissioner Paolo Gentiloni wrote in the Frankfurter Allgemeine Zeitung (FAZ) daily.

That could take the shape of “a European fund whose explicit function would make possible issuing long-term bonds,” Breton and Gentiloni suggested.

“Strictly limited to collective investments for industrial revitalisation in the context of the current crisis,” the instrument would be proof of “unshakeable solidarity” among EU nations, they argued.

READ ALSO: Germany 'ready for European solidarity' but won't back 'coronabonds'

A group of states including southern European heavyweights Italy, France and Spain have been imploring northerners like Germany, Austria and the Netherlands for common debt facilities to cushion the economic impact of the virus.

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But conservative politicians in the north fear the plans would mean the eventual mutualisation of all sovereign debts and their taxpayers footing the bill for supposed southern profligacy.

Finance ministers from the 19 euro single currency member states will meet Tuesday to again seek a solution to the deadlock.

German Finance Minister Olaf Scholz on Friday proposed a three-pronged scheme including cheap loans from the financial crisis-era European Stability Mechanism (ESM), cash from the European Investment Bank and an EU-wide unemployment reinsurance scheme, skirting the issue of joint debt.

And EU Commission President Ursula von der Leyen on Friday promised a post-crisis “Marshall Plan” for the bloc funded through its existing joint budget, whose next seven-year period runs from 2021-27.

Responding to Scholz's plans, Breton and Gentiloni argued Monday that a “fourth pillar” of financial aid would be needed to master the crisis, “given the size of the sums involved”.

Also in the FAZ and France's Le Figaro Monday, Bundestag president Wolfgang Schaeuble and his French counterpart Richard Ferrand called for “more solidarity and fiscal integration” in Europe.

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