Monday, August 02 2021
Clear Sky
18°C New York

1 € = $ 1.1895
1 $ = € 0.8407

Eurozone ministers set to finalize Covid-19 loan scheme

Eurozone finance ministers are expected on Friday to put the finishing touches on a scheme for member states to access coronavirus loans, but no progress is expected on a larger, more contentious recovery fund to weather the crisis.

EU Commission approves Greece's 'Hercules' plan for non-performing ...

EU leaders agreed last month to a credit line facility for member states to cover direct and indirect health care costs related to the pandemic. They gave finance ministers until June 1 to get the scheme up and running.

Ahead of Friday's video conference with his eurozone counterparts, German Finance Minister Olaf Scholz expressed confidence that they could settle the final details, following "intensive and constructive" negotiations.

The issue of how to manage the economic fallout of Covid-19 has reopened acrimonious divisions between EU capitals, with several economically weaker southern member states set to suffer more than their northern neighbours.

Friday's talks come after the European Commission predicted a recession of "historic" proportions and a partial, uneven recovery.

The commission has been tasked with drafting a recovery plan, after member states failed to agree on the size and financing of a fund expected to be worth at least 1 trillion euros (1.1 trillion dollars).

The credit line - one of three strands of the European Union's economic response to the crisis that have been approved - will be issued by the eurozone bailout fund, the European Stability Mechanism.

However, the scheme is unpopular among those likely to need it most, tainted by memories of the eurozone crisis a decade ago and fears that it could open the door to rigorous economic scrutiny.

The commission sought to allay these concerns in a letter this week to Mario Centeno, who heads the Eurogroup of eurozone finance ministers.

Monitoring should only focus on whether the credit is being spent on healthcare costs and should not entail "ad hoc on-site missions," commission Vice President Valdis Dombrovskis and EU Economy Commissioner Paolo Gentiloni proposed.

The controversial recovery fund - an issue that held up the last Eurogroup meeting for several days - is not on the table during Friday's talks, with the commission still working on its proposal.

Ahead of the meeting, however, the French Finance Ministry outlined a proposal to inject 150-300 billion euros into the bloc's budget each year until 2023, providing member states with grants to combat the economic fallout of Covid-19.

The aim of the recovery fund should be to "smooth the extraordinary costs of this once-in-a-lifetime crisis over the very long term," according to a text Paris has drafted and circulated among other capitals.

The response should focus on grants, Paris argues. These could be topped up by loans with a "very long maturity and low interest rate," according to the document seen by dpa, which floats a 2060 repayment deadline.

Countries including the Netherlands are staunchly opposed to a grants-based approach.

The debate among EU capitals on the recovery fund includes "large divisions," and the outstanding issues remain "very controversial," French Finance Ministry sources acknowledged on Friday.

Meanwhile, European Central Bank chief Christine Lagarde called for a "swift, sizeable and symmetrical" response, warning against further widening gaps within the eurozone.

"Since no one is to blame for this crisis, we must ensure that there are no undue constraints on our policy responses," she said at an event organized by the European University Institute to mark the 70th anniversary of the EU's foundation.