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Who's going to pay for European coronavirus recovery?

Who's going to pay for European coronavirus recovery?

focus photography of person counting dollar banknotes

London (CNN Business)EU finance ministers have approved €500 billion in stimulus measures designed to cushion the blow to their economies from the coronavirus pandemic, while leaving open the difficult question of how to pay for the region's recovery.
The deal was announced Thursday after weeks of back and forth over how to address the crisis, a bruising process that exposed deep divisions and led Italian Prime Minister Giuseppe Conte to warn that a failure to act would mean "the end of Europe."

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The stimulus package includes up to €100 billion ($110 billion) in wage subsidies aimed at preventing mass layoffs, as well as hundreds of billions in loans to businesses and credit for EU governments. The finance ministers also pledged to work on a recovery fund that will help the region bounce back from what promises to be a historic recession.
Yet little progress was made on how to finance the response.
Nine of the countries that use the euro, including Italy and France, had called for the European Union to issue debt, dubbed corona bonds, to raise long-term finance for all member states to help repair the damage wrought by the pandemic.
German Chancellor Angela Merkel, backed by the leaders of Austria and the Netherlands, have said no. They have long opposed the issuance of debt at the EU level for fear that it would effectively mean their taxpayers are underwriting spending by poorer member states.

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Mujtaba Rahman, managing director for Europe at the Eurasia Group, wrote in a research note on Friday that the agreement reached by the finance ministers punts on this key issue, leaving it to be addressed in future negotiations when leaders "are confronted with a devastated economy and the need to rebuild."
Analysts at Berenberg Bank said that how the European Union responds to the crisis will have major implication for the future of the bloc. The stakes, they argued, are even higher than during the eurozone debt crisis in 2011 and 2012.
"A perceived lack of solidarity in the worst peacetime crisis in living memory could be dynamite for the longer-term cohesion of the eurozone and the European Union," they wrote after the deal was announced.
Europe has already taken some other measures to protect workers and business. EU limits on budget deficits have been relaxed to allow member countries to borrow more, and the European Central Bank has also pumped hundreds of billions into markets to prevent the shock from triggering a new financial crisis.

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