Eurozone finance ministers have reached an interim agreement on supporting the common European economy, which should make its bailout a little closer, writes CNBC.
The main issue for discussion by 19 ministers was the application of a unified approach to ensuring financial stability for different members of the eurozone. Traditionally, countries in northern Europe are considered more stable and prosperous than their southern partners in the EU and the eurozone is largely due to fiscal discipline. Southern countries often have a larger public debt.
Because of this, during financial crises, it can be difficult for eurozone members to agree on joint actions: rich countries do not want to help the poor at the expense of their taxpayers. This causes concern for investors who are in no hurry to invest in debt instruments issued by individual European countries.
The same issue became the subject of controversy when discussing a plan to rescue the European economy from the consequences of the crisis caused by the coronavirus pandemic. According to him, a fund of 750 billion euros will be created, from which grants and loans will be issued to the most affected countries. It will be financed by bonds issued by European Commission .
However, the members of the eurozone have still not been able to come to an agreement on the principles of such a fund, since it is planned to pay off obligations to investors at the expense of the pan-European budget, which means that the EU may for the first time introduce a single tax for all countries. The least affected states disagree with this provision.
During the meeting of the ministers, it was decided to make more active use of the existing mechanisms to support the economy, in particular the European Stability Mechanism (ESM), which was used during the debt crisis in the eurozone in the early 2010s. It is expected to serve as a source of emergency funding for the Controversial Matters Fund (SRF), if necessary, through which European Central Bank (ECB) warns bankruptcy of credit institutions.
Chairman of the meeting, Irish Finance Minister Pascal Donoghue called the negotiations “really difficult.” The agreements reached are expected to improve the reliability of European debt instruments (including future bonds issued on behalf of the European Commission) in the eyes of external investors.