Yesterday’s decisions by euro zone finance ministers on how to ‘jointly’ deal with the double storm of the pandemic and economic collapse proved that the ‘logic’ of ‘saving yourself’ remains dominant in Europe’s capital crisis.
Despite a clear effort by the political representatives of the European capital to present yesterday’s Eurogroup decisions as a ‘balm’ to the extremely unprecedented difficulties of euro zone and especially the countries most affected by covid-19, the real ‘assistance’ they have decided is completely incompatible with the scale of their needs.
In fact they ‘agreed’ to the absolute minimum that existed as a possibility from the first phase of the Eurogroup last Tuesday. The package is 540 billion euros from three sources. The first is the ESM from which 240 billion euros will be given in loans.
The second is loans from the European Investment Bank of 200 billion euros and the third concerns a Fund that will act as a guarantee for national unemployment benefit funds of 100 billion euros.
Of the three financial instruments decided for immediate use up to EUR 540 billion, a ‘tool’, that of the ESM reveals the clear inadequacy of yesterday’s decisions. The loans that member states will ask for can be exempt from fiscal (memorandum) conditions only to the extent that the country is able to prove in each audit that it has spent the loan on health expenditures only, as the Minister of Finance Of the Netherlands explained, to avoid misunderstandings… Any other expenditure, as he has carefully taken care to explain, will be subject to the ECCL’s (mnemonic) commitments, as provided for in the ESM Regulation.
After this conclusion, however, it is rather certain that the ECB will need to come back intrusively in order to fill this gap and even indirectly balance the pressures that the euro will inevitably face on the foreign exchange markets.After all, the FED’s new move to boost the US economy by an additional $ 2.3 trillion, and its decision to expand its markets even to current ‘non-investment grade’ securities (ie the so-called ‘garbage’) has Cause even greater pressure in the Eurozone.
Once again, the issue of a Eurobond, i.e. the mutualisation of debt to finance the pandemics and the extreme recession associated with Lockdown in each country, is being cited for the distant future, leaving the Eurozone with an ‘aid’ of EUR 540 billion, when according to the ECB the needs directly exceed EUR 1.5 trillion. The promise of Germans and French to have a debate on the creation of a reconstruction fund in the future is left to hover in The European firmament in order to cover the immediate inadequacy of yesterday’s decision. During the discussions, the eight countries that had requested Eurobonds finally backed down except for the Italians in despair. Among them, of course, was Staikouras, who was mentioned for not even mentioning such an issue in the debate…
What is striking is that even this promise yesterday was made public with the accompanying explanation that this Fund cannot hope for a financial instrument based on debt mutualisation either.