Greetings from Brussels!

Outside individual national efforts to address the impact of COVID-19, the EU as a collective bloc has been struggling to reach a consensus on common measures to address the economic impact and potential legacy of the pandemic. Eurozone finance and economy ministers have been locked in discussions — by videoconference — throughout the week in an attempt to hash out a deal. As a reminder, the Eurogroup comprises 19 of the 27 EU member states where the euro is the national currency. To state that the current challenge is all-encompassing for the EU would be an understatement. COVID-19 presents the single biggest challenge to EU unity in recent times and arguably its greatest test since its beginnings, given the magnitude of the task. Most importantly of all, a consensus must be reached to maintain confidence in the euro currency.

I am reminded of past crises, such as the financial collapse of 2008, when at the time, member state divergence in opinion led to inter-union squabbles over fiscal direction. COVID-19 appears to be opening old wounds, highlighting some of the fragility that is a reality of the Union. All said, one shouldn’t underestimate the depth of the negotiations required to see a plan materialize to reignite economies on the road to recovery once countries have ended their lockdowns and reopened borders for business.

EU ministers are looking to agree on three separate initiatives as a package. The European Commission’s proposal for a temporary unemployment reinsurance plan to the tune of 100 billion euros would support national public plans to facilitate companies to reduce working hours and offset lost employee income. The second measure is proposed through the European Investment Bank to create a 200 billion euro fund, which could issue cheap loans to cash-strapped companies. The last and most contentious of the measures is the Eurozone’s bailout fund instrument known as the European Stability Mechanism, which would be bolstered with a fresh liquidity injection of more than 200 billion euros — incidentally, the ESM was created post-2008 financial crisis. In what concerns the ESM, countries that use the euro currency could draw credit lines worth 2% of their economic output, but there is debate over the conditionality attached as to what funds can be used for.

"Corona" Eurobonds, a proposal led by Italy and Spain and backed by other countries, such as Belgium and Ireland, are also at the center of the debate. The basic concept is that eurozone countries would collectively guarantee debt in the form of bonds. Such bonds could potentially raise hundreds of billions of euros; moreover, the move would be the biggest shift yet toward financial integration within the eurozone. This measure has its opposition, primarily from the German and Dutch governments. The French, in turn, proposed an amendment to cap the number of bonds that could be issued, on the condition that funds raised only be used for COVID-19-related expenditures.

Against a backdrop of current and declining returns on European member state economies, clearly some of the measures on the table have created a heightened sense of angst. Much of the economic growth of the last couple of years could be wiped out in the coming months. German analysis forecasts economic contraction of up to 10% by June. This is an unprecedented recession even for the bigger economies.

These are complex discussions, where fiscal policy remains one of national prerogative above all else. And while earlier in the week negotiations broke down, a good many bilateral talks have been going on in the last days. German Finance Minister Olaf Scholz told reporters ahead of a decisive videoconference between EU ministers Thursday evening that an agreement was possible.  

Now we wait as a decision worth billions and affecting millions hangs in the balance.