EU nations battle to bridge bitter split over ‘coronabonds’

EU finance ministers were mired in marathon talks on Wednesday unable to bridge differences on how to rebuild their economies after the coronavirus, with a North versus South split on burden-sharing for hard-hit countries.

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The European economy has been battered by the pandemic as national governments impose strict lockdowns that have closed businesses and put normal life on hold.

The ministers' video conference dragged on for over 15 hours from Tuesday into Wednesday, with Italy and Spain pleading for a solidarity fund that would be paid for by European partners jointly borrowing money on the financial markets.

A medical staff member takes samples from a driver to test for Covid-19 at a drive-through point in Rome. AP

Sometimes called "coronabonds", this proposal is being firmly resisted by Germany, the Netherlands and other rich countries who see it as an attempt by the indebted south to unfairly take advantage of the north's fiscal discipline.

"All I can say is that there is no deal at the moment and I would not take for granted that there will be a deal," a European source said as dawn broke over Brussels.

'No business as usual'

Berlin and its allies are insisting that any European rescue should use the eurozone's 410-billion-euro ($443-billion) bailout fund, as well as wait to see the effects of the massive monetary stimulus already unleashed by the European Central Bank.

Medical staff members prepare their gear at Saint-Jean train station in Bordeaux, France. File/AFP

Eurogroup chief Mario Centeno is tasked with finding a compromise in a fight that has revived the bitter acrimony that split Europe during the eurozone debt crisis a decade ago.

"We all know this is not time for business as usual policies. We must show our citizens that Europe protects them," said Centeno, who is also Portugal's finance minister.

Ministers must "make a clear commitment for a coordinated and sizable recovery plan," he said.

On Monday, German Chancellor Angela Merkel reiterated her government's position in favour of activating the European Stability Mechanism (ESM) bailout fund to help countries that need it.

But she pointedly did not mention shared borrowing such as coronabonds or eurobonds, angering Rome.

German Chancellor Angela Merkel speaks during an event. File photo

"Eurobonds represent a serious response tailored to the crisis we are living through," Italian Prime Minister Giuseppe Conte argued on Monday.

Influential France backs Italy and Spain and insists the economic destruction caused by COVID-19 demands a new way of thinking in Europe, and wants member countries to help each other in unprecedented ways.

Agence France-Presse