Celebrations as Wuhan opens up
EU talks on how to help southern Eurozone countries affected by the pandemic stalled after 16 hours
RESIDENTS in Wuhan – where the coronavirus crisis began last year – have been celebrating the end of more than 70 days in lockdown.
Streets in the city of 11 million people were clogged with traffic and long queues formed at the airport, railway and bus stations as thousands streamed out of the city to return to homes and jobs elsewhere.
An emotional Tong Zhengkun told how he hadn’t been outside for more than two months. “Being indoors for so long drove me crazy,” he said.
EUROPEAN governments remain at loggerheads over measures to help the economy weather the coronavirus outbreak after a meeting of finance officials broke up without agreement when they clashed over aid conditions and a proposal to borrow together to pay for the health crisis.
Finance ministers from the 19 countries that use the euro talked by video conference for 16 hours and postponed their news conference until today after a meeting that started on Tuesday ran late into the night.
European governments are scrambling to put together hundreds of billions of euros to save lives as well as companies and families from going bankrupt.
The European Central Bank says the bloc may need up to €1.5 trillion £1.3trn) to tackle the crisis.
Many countries hit hardest by the virus are also those that can least afford the costs, such as Italy and Spain.
But they are divided over how best to tackle the challenge.
France’s central bank said the country has entered recession with a 6 per cent drop in the first quarter and German economists predict the economy will shrink 4.2% this year.
Italy and Spain, backed by France, want to throw all the European Union’s economic might into fighting the virus and damage from the disruption it has caused as soon as possible.
The deadlock recalls the divisions from the eurozone debt crisis of 2010-2015.
On the table is a three-part package amounting to around £440 billion. It consists of up to £210bn in emergency loans from the eurozone’s standing bailout fund, credit guarantees from the European Investment Bank to keep companies afloat, and support for short-work schemes that help firms avoid lay-offs during what is hoped are temporary business interruptions.
Italy has rejected using the bailout fund, the European Stability Mechanism (ESM).
One reason is that the money is supposed to come with conditions to carry out economic reforms, based on the fund’s original purpose as a bailout refuge for troubled countries.
Italy argues that makes the ESM the wrong tool since the virus is no country’s fault. Prime Minister Giuseppe Conte has dismissed the bailout fund as “totally inadequate”.
Even before the economic damage of this crisis, Italy’s public debt was 133% of its GDP (total output), or about £2trn – the highest in the eurozone after Greece.
Germany has proposed waiving most conditions on the money, but the Netherlands has pushed for requiring reform promises.
The issue of conditions raises the spectre of the harsh austerity imposed on Greece after its three bailouts during the debt crisis, with deep cuts in spending and salaries, official visits by an enforcement committee and the perception of a loss of national sovereignty.
German finance minister
Olaf Scholz said he and his peers were close to a deal on the bailout loans, company support and short-work schemes.
“We are mostly in agreement but not quite all the way,” he said, citing the need for unanimity over conditions for the ESM loans and that he expected agreement before the end of the week.
He said the position of Germany and other countries was that loans should come with minimal conditions and “should not mean that, as happened 10 years ago, commissars or a troika
We are mostly in agreement but not quite all the way
travel to the countries and develop a programme for the long term”.
Italy, backed by France, Spain and six other countries, had pushed to go even farther than using the ESM and rely on a shared bond issue backed by all countries to raise money at low interest rates and favourable conditions, such as long repayment.
Germany and the Netherlands have resisted common borrowing.
Mr Scholz said there had been discussions about a longer-term recovery programme that could be discussed separately from the three aid programmes under discussion but did not provide details.
French finance minister Bruno Le Maire tweeted that he and Mr Scholz “call on all European states to rise to the exceptional challenges to reach an ambitious agreement”.
The meeting’s chairman, Portuguese Finance Minister Mario Centeno, said he had suspended the talks until today but was still seeking a strong safety net against the effects of the virus.
For now, a draft text of what has been agreed states “innovative financial agreements” will need to be used.
The coronavirus pandemic has exposed deep divisions in Europe, where Italy and Spain have accused northern nations – led by Germany and the Netherlands – of not doing enough.