The Irish Times view on the EU’s financial response: Falling short

European Central Bank has acted decisively, but the political response has been less impressive

Funds are to be made available from the European Investment Bank to support financing for businesses. Photograph: iStock

Funds are to be made available from the European Investment Bank to support financing for businesses. Photograph: iStock

 

The euro zone finance ministers at least reached an agreement on €500 billion worth of measures after a lot of talking during the week. However they did so via a route which did not take sufficient account of the terrible suffering taking place in some countries.

The euro group did make some progress. Funds are to be made available from the European Investment Bank to support financing for businesses and the European Commission is to push forward with a common financing mechanism for special unemployment supports. So far so good, even if these are limited measures.

The ministers, after much discussion, also decided to make available funding from the European Stability Mechanism, the rescue fund set up after the financial crisis. The compromise is that a sum equal to 2 per cent of GDP can be made available via cheap funding to help pay for healthcare and other direct Covid-19 measures.

This much will be available without onerous conditions being applied. However any further funding from the ESM would come with terms and conditions, which to countries applying for such help might feel like a bail-out programme.

The ministers also agreed to put forward the idea of a recovery fund, which could raise finance and have an important role in future. However there was no agreement on how this would work and opposition from many northern EU countries to mutual debt raising remains. Ireland, along with France, supports the idea of special mutual borrowings, so-called coronabonds, to address the crisis – this is appropriate given the scale of what has happened, but early progress looks unlikely.

So far, while the European Central Bank has moved with commendable speed, the political response to the crisis has been less impressive. Yes, there are questions about how mutual borrowing would work, particularly given the absence of a large centralised fiscal structure in Europe. But, politically, the spirit of the response so far falls short of what is needed at a time of such extraordinary pain and suffering.

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