The €240 billion in ‘cheap’ loans for countries affected by the coronavirus COVID-19 will be available as from 15 May, 15 days ahead of the expected date, European Stability Mechanism (ESM) chief, Klaus Regling, said on Friday (8 May).
The euro area finance ministers (Eurogroup) agreed on Friday on the final details of the ESM’s pandemic programme to support economies that have been hard-hit by the virus.
The instrument could lend up to 2% of the GDP of each euro area country, totalling around €240 billion for the whole bloc.
The ESM assistance is part of a broader package to provide liquidity to EU countries to cope with the fallout of the virus totalling €540 billion that should be ready for 1 June.
But Regling said the instrument could be ready as of 15 May, when the ESM board, made up of the euro area finance ministers, could give the final blessing. By then, all member states are expected to conclude their national procedures.
The president of the Eurogroup, Mario Centeno, insisted that “there is no stigma” for any country requesting the European aid, as all eurozone governments will be eligible, there will be no troika surveillance or cash-for-reforms programme like in the previous crisis. “This is very important to stress at this moment”, Centeno added.
Regling stressed that the “only condition” will be that the funds are allocated to direct and indirect health-related costs caused by the COVID-19, including “prevention-related costs”.
A European diplomat contacted by EURACTIV interpreted this to mean that prevention measures could include a big part of the confinement expenditure, caused by the enforcement of the lockdown in most countries to stop the spread of the virus.
The European Commission will be responsible to assess whether the countries requesting soft loans include valid costs covered by the programme.
But both Regling and the Commissioner for Economic Affairs, Paolo Gentiloni suggested that there would be a broad interpretation of the scope.
“There is a very clear understanding that the 2% will be made available”, said Regling.
Still, requesting the ESM support has become controversial especially in countries like Italy.
Meanwhile, the government of Spain, one of the most affected countries by the coronavirus, has said that it will continue to seek finance in the markets for the time being.
Gentiloni told reporters this week that the instrument would be an “opportunity” for countries that could face higher interests among investors to finance their debt.
Regling explained that the loans will have a “very low cost, only marginally above zero”, of around 0.1%. In addition, they will have long maturities of 10 years.
The approval of the ESM pandemic instrument came after a tense discussion among the finance ministers last month, as a group of countries, including the Netherlands and Austria, wanted to impose stricter conditions on those seeking aid in return for the ESM credits.
The Eurogroup also discussed on Friday the ruling of the German constitutional court on the ECB’s bond-buying programme, that questioned the authority of the European Court of Justice and the ECB’s monetary policy.
Gentiloni said that the EU law has primacy over national law, and recalled that the European Court of Justice “alone” has jurisdiction over EU law. He added that the independence of the ECB is “beyond question”.
The Italian Commissioner did not exclude the possibility of launching an infringement procedure against Germany for questioning the authority of the ECJ, as the Commission services are now studying the ruling before deciding the next steps
But he stated that the EU executive has “a strong interest” as a guardian of the EU law on ensuring the proper functioning of the EU’s monetary policy and its court system.