Euro zone finance ministers failed to reach an agreement Wednesday on how to provide additional stimulus to weather the economic impact of the coronavirus pandemic.
The COVID-19 virus, which emerged in China in late 2019, has brought the major European economies to a halt. Businesses activity has been put on hold across the region and that's pressured governments to take bold action to support companies and citizens.
However, after 16 hours of talks, the finance ministers remain divided over how best to provide loans and whether to go as far as issuing joint EU debt.
"We came close to a deal but we are not there yet," Mario Centeno, who chairs the meetings among the 19 ministers, said on Twitter.
The group had been working on a new credit line to be provided by the European Stability Mechanism — an emergency fund that was set up in the wake of the sovereign debt crisis. A few of the countries — in particular, the Netherlands —were pushing for some conditionality attached to the loans. However, other nations, such as Italy and Spain, did not want any fiscal targets in exchange for new funding.
Ministers were also divided over developing a new debt instrument. Italy, France, Spain, Ireland and Luxembourg were pushing for a written commitment to work towards joint debt issuance. However, opposition — again, mainly from the Netherlands — has blocked this idea so far.
Wopke Hoekstra, the Dutch finance minister, said Wednesday morning that his country "was and remains against the idea of euro bonds (an instrument that would combine European securities)."
"We think this will create more problems than solutions for the EU. We would have to guarantee debts of other countries which isn't reasonable," the minister said on Twitter.
Euro zone finance ministers are used to pulling all-night meetings to reach an agreement, but their actions to address the ongoing pandemic are being closely monitored.
"The lengthy delays and intense jostling will tarnish whatever measures are eventually agreed," Florian Hense, economist at Berenberg bank, said Wednesday in an email.
He warned that "in the long run, the way in which the EU and the euro zone are perceived to react to the unprecedented emergency of the Covid-19 pandemic can shape attitudes to European integration for decades to come."
Anti-EU parties have been quick to react to the ongoing stalemate.
Matteo Salvini, head of the anti-EU Lega party in Italy, said yesterday he doesn't trust loans coming from the EU and he doesn't want Italy to ask Berlin or Brussels for more money.
Meanwhile, in Germany, Alternative for Deutschland (AfD), which entered the German Parliament for the first time in 2017, has spoken out against corona bonds — another plan to address potential EU debt issuance to fund some of the costs of the pandemic. A spokesman for the AfD said neither the coronavirus nor the euro "justify that German taxpayers are bled for the debt of the whole EU."
European ministers will meet again Thursday as they seek to overcome these two differences.