On Wednesday, the Euro zone’s finance minister failed to reach an agreement. Importantly, finance ministers representing the 19 countries that use the Euro currency are struggling to agree on new ways to support the economy.
Moreover, ministers suspended negotiations regarding a new rescue package after 16 hours of talks. However, the finance ministers will continue to discuss this topic on Thursday.
As a reminder, coronavirus pandemic affected economies around the world. According to Portugal’s finance minister, Mario Centeno who chairs the meetings stated that ministers came close to reach an agreement. However, it will take more time to reach an agreement. Centeno remains committed to agreeing on a sizeable recovery plan that protects businesses and employees.
Interestingly, the package would be worth about $543 billion in total. This package includes credit lanes as well as guarantees and employment protection programs.
It is important to note that, the measures stated above comes on top of national fiscal policies. The national policies represent nearly 3% of the European Union Gross domestic product (GDP).
As mentioned-above finance ministers failed to reach an agreement. Old divisions between countries complicated a collective fiscal response in Europe. The nine countries that use the euro, including Italy, France and others called for the EU to issue joint debt, dubbed corona bonds. The purpose of corona bonds is to raise long-term finance for all member states.
However, Germany along with Austria and Netherlands are against the joint EU debt. According to the Dutch finance minister Wopke Hoekstra, his country is against the idea of euro bonds.
The economy of the Euro Zone
Euro zone’s two largest economies are trying to deal with issues caused by the coronavirus. Based on the information provided by Germany’s top economic research institutes, the country’s economy is expected to shrink by 4.2% in 2020.
Moreover, France’s central bank estimated that the economy of France shrank by around 6% in the first three months of 2020.
European Union already took some measures. For example, the EU relaxed limits on budget deficits. As a result, member states have the opportunity to borrow more money. Moreover, the European Central Bank injected hundreds of billions into markets to prevent a financial crisis.
Finance ministers representing Euro Zone member states will meet again on Thursday. They will try to come to an agreement. However, it won’t be easy to convince Germany, Austria, and the Netherlands. Despite their disagreement, they should work together to reach an agreement as soon as possible.