EU finance chiefs agree on 540-billion-euro virus rescue package

Brussels

EUROPEAN Union (EU) finance ministers have agreed on a 540-billion-euro (S$835.3 billion) package of measures to combat the economic fallout of the global coronavirus pandemic.

It is now up to the bloc's leaders to approve the accord, which will surely require overcoming profound political disagreements.

In an emergency teleconference late on Thursday, finance chiefs approved a plan to stave off what is expected to be a recession of unprecedented size.

The deal will lay to rest - at least for now - concerns that the EU was incapable of uniting behind a common strategy when it was most urgently needed.

In a sign of relief, ministers broke out in applause once consensus was struck.

"Today, we agreed on three safety nets and a plan for the recovery to ensure we grow together and not apart once the crisis is behind us," Mario Centeno, the Portuguese finance minister who runs the so-called eurogroup meetings, told reporters.

The common response includes a joint employment insurance fund worth 100 billion euros, a European Investment Bank instrument intended to supply 200 billion euros of liquidity to companies, as well as credit lines of as much as 240 billion euros from the European Stability Mechanism (ESM) - the euro area's bailout fund - to backstop states as they go on a spending spree to help economies back on their feet.

The ministers also agreed to work on a temporary fund that would help kick-start the recovery and support the hardest-hit countries while leaving how it would be financed. French Finance Minister Bruno Le Maire said the fund could be decided on in the next six months and may total 500 billion euros.

All of it needs approval by government leaders as early as next week, and tensions persist. With several key divisions papered over on Thursday, disagreements are likely to resurface when leaders are called to sign off.

Covid-19 has overwhelmed Europe, with the continent suffering more than 65 per cent of the worldwide deaths attributable to the virus. The scale of the damage shines a spotlight on the vulnerabilities of a union whose sense of common purpose has been tested over the past decade by the Greek debt crisis, an influx of refugees and then Brexit.

But the coronavirus outbreak - in the words of German Chancellor Angela Merkel, a veteran of many geopolitical fights - poses the biggest threat to the EU since World War II.

While the virus's reach has been indiscriminately global, most countries have acted alone and in their own interests. Europe's more frugal north is pitted against Italy and Spain, the worst-affected countries, in a climate of mistrust and simmering resentment.

Disagreements were laid bare earlier this week when finance ministers failed to agree on a joint response after 16 hours of bitter negotiations.

Things were different on Thursday. The meeting was delayed by nearly five hours while key countries including the Netherlands, Italy, France, Germany and Spain negotiated a compromise that would ultimately be uncomfortable to most, yet acceptable to all. Once the meeting started, however, it took just 30 minutes to declare success. The result was an EU compromise.

The agreement on the recovery fund was a victory for countries including France, Spain and Italy, which have been pushing for it to be financed through joint debt issuance.

Yet the text skirted the question of common debt and only mentioned "innovative financial instruments" - a reference that even countries like Germany, that are loath to agree to further risk sharing - could live with. The wording on the use of credit lines from the bailout fund left a lot to be desired for all camps. BLOOMBERG