Germany and the Netherlands, two of the staunchest opponents of the idea of issuing common debt in the eurozone, would be open to discuss new eurobonds to mitigate the economic impact of the coronavirus COVID-19.
According to calculations by the German Institute for Economic Research (ifo), the pandemic threatens hundreds of billions of euros in production losses, rising unemployment and a hefty deficit in the national budget. Depending on the scenario, the economy is expected to shrink by 7.1 to 20.6 percentage points, corresponding to 255-729 billion euro, according to Euractiv.com.
EU leaders from the most affected countries have called for the mutualisation of debt issuance to finance a coordinated fiscal stimulus.
These temporary eurobonds, or ‘coronabonds’, could be acceptable to the Netherlands. The Hague has always been against any fiscal transfer and the mutualisation of risks among European partners. In this case, the country could be “open to that discussion”, although there are other instruments and options that should be considered before, according to an EU diplomat.
The Dutch government, however, wants to fully exploit the flexibility of the Stability and Growth Pact and the state aid rules, to make the most of the national expenditure. After that, it should be explored what additional tools could be used from the European Investment Bank and the ECB.
“Lets look at other options first, before looking into most difficult one,” the EU diplomat added in a reference to the ‘coronabonds’.
The idea of the ‘coronabonds’ was raised by Italian Prime Minister Giuseppe Conte during the EU leaders’ teleconference on Tuesday.
According to Bloomberg, German Chancellor Angela Merkel didn’t veto it and was ready to let her finance minister, Olaf Scholz, engage in the discussion. She later told reporters that she would “talk to Olaf Scholz so that Germany continues to take part (in the discussions). But there are no results regarding this.”