Spain’s Sanchez calls for shared EU debt, Merkel unmoved on bonds 

Brussels (dpa) – Spanish Prime Minister Pedro Sanchez made the case for ambitious EU fiscal intervention, including shared debt, on Sunday, but there was no indication of a change of heart in Germany on the question of “coronabonds.”

“It is time to act with solidarity: creating a new debt mutualization mechanism,” Sanchez wrote in an op-ed for several newspapers, including Italy’s La Repubblica and Germany’s Frankfurter Allgemeine Zeitung (FAZ).

“This is a time for breaking old national dogma,” he urged ahead of a key EU finance ministers’ meeting on Tuesday.

EU member states are at odds over how much fiscal firepower to use to cushion the economic blow of the coronavirus pandemic.

Italy, backed by Spain and France among others, argue that jointly issued bonds are the only way to borrow the hundreds of billions of euros necessary for recovery at a low cost.

Germany, along with Austria and the Netherlands, fears taking on liability for other countries’ debt.

Measures already agreed to shore up the bloc’s economy are a good start but do not go far enough, according to Sanchez.

A package of three shorter-term measures looks set to be signed off on Tuesday but the thornier question of a collective debt instrument, so-called coronabonds, is more divisive.

German Chancellor Angela Merkel’s position is unchanged, according to her chief of staff Helge Braun.

The government is “sceptical towards anything that endangers the stability of the eurozone economic and currency area,” the head of the Federal Chancellery told FAZ on Sunday.

The dispute over the bonds is emotionally charged. Italy, the EU state affected worst by Covid-19, feels that it has been neglected by its European partners. Polls show increasingly negative perceptions of the EU since the start of the crisis.

Germany and France have thrown their weight behind a trio of measures, for which eurogroup president Mario Centeno says there is broad support. A previous videoconference of finance ministers and an EU leaders’ videosummit on fiscal measures both ended without agreement.

The package includes a credit line from the eurozone bailout fund, a guarantee fund from the European Investment Bank enabling loans for smaller business, and a loan instrument proposed by the European Commission for businesses to pay wages of workers they would otherwise lay off.

The measures are worth around half a trillion euros (540 billion dollars), according to Centeno.

European Commission President Ursula von der Leyen is calling for an investment drive like the Marshall Plan, the huge economic stimulus package channelled by the US to the ravaged economies of Europe after World War II.

“We will need massive investment in the form of a Marshall Plan for Europe. And at the heart of it should lie a powerful new EU budget. The advantages of this are obvious: the EU budget is a proven instrument of solidarity,” she wrote in an op-ed published in several European newspapers on Sunday.

Von der Leyen herself has been lukewarm to the idea of bonds so far but says all options are on the table. She believes an overhaul of the next EU long-term budget is key, but EU leaders are equally divided on this front.

While finance ministers may sign off the three-part package on Tuesday, Italy, Spain and France have indicated that this won’t be enough.