EU finance ministers forgo using fiscal 'firepower' for now

[BRUSSELS] EU finance ministers pledged on Monday to fight the coronavirus "war" that is destroying their economies, but held off from announcing a major plan to boost Europe.

One by one, EU nations are enforcing strict lockdowns as governments make the tough decision to sacrifice their economies in last-ditch hopes of slowing the spread of the disease.

Eurogroup chairman Mario Centeno said the unfolding scenario was "war-like" and that EU ministers meeting by videoconference were duty-bound to do whatever it took to respond to the crisis.

However, the ministers declined to specifically call in the help of the European Stability Mechanism, the eurozone's 410 billion euro war chest.

"We will do whatever it takes and more to restore confidence and support a recovery," said Mr Centeno, who is also Portuguese finance minister.

However the ESM was built "in the midst of a very different crisis," Mr Centeno said in reference to the eurozone debt crisis.

"But rest assured that we will defend the euro and our citizens with everything we've got," he said.

The ministers - exceptionally joined by colleagues from outside the single-currency euro bloc - signed off on a raft of less ambitious proposals by the European Commission, the EU's executive arm, including waiving rules on public overspending.

Those will accompany a "surgical" stimulus decided by the European Central Bank, whose chief Christine Lagarde gaffed on Thursday when she said Italy's debt problems were not her problem, spooking the markets.

Financially pressed Italy is the hardest-hit country in Europe by the coronavirus outbreak, but other major economies like Spain and France are quickly following in its footsteps.

"We will make sure that EU fiscal rules or state aid rules will not stand in the way of supporting our economies. Flexibility is there and will be used," Mr Centeno said.

A statement by the ministers stressed that national governments had already pumped one percent of Europe's annual output into the economy and nothing would get in the way of them spending more.

ESM'S 'ENORMOUS FIREPOWER' 

If need be, the ESM bailout fund, which is governed by the eurozone's 19 finance ministers, can pump in about 3.4 per cent of annual output.

"The debate whether we have to deploy the ESM comes too early," German finance minister Olaf Scholz told the Handelsblatt newspaper.

"The existence of the ESM alone provides stability because it can be used at any point in time and because it has an enormous firepower," he said.

The ministers' caution in pulling out the fiscal bazooka was frustrating to some.

"We need a strong monetary and budgetary response at national and supranational level," said Spanish finance minister Nadia Calvino, calling for a "common and coordinated response from across Europe".

AFP