By Michelle Martin
BERLIN (Reuters) – Euro zone states that need aid from the bloc’s bailout fund to tackle the economic fallout from the coronavirus outbreak should get it quickly without being subjected to lengthy visits and policy proposals from officials, Germany’s finance minister said.
Olaf Scholz told broadcaster ARD late on Thursday he was convinced the European Stability Mechanism – a bailout fund with 400 billion euros ($434 billion) in firepower – had instruments suitable for use during the coronavirus outbreak, which has hit euro zone countries like Italy and Spain particularly hard.
“We have the possibility to say we can do something as a precaution,” Scholz said. He added that any such action would be tied to rules but that these needed to be appropriate for the current situation in which funds were required for health and securing jobs.
“From my point of view it’s especially important to ensure that if a country says it wants to use these funds, that there’s not then a load of commissioners who go there and first spend weeks discussing with them how they should change their policies in the coming years,” Scholz said.
He stressed that the aid needed to flow quickly, adding: “We don’t need a Troika to come and first make proposals for the future.”
When Greece was bailed out during the euro zone sovereign debt crisis, a team of officials from the International Monetary Fund, the European Commission and the European Central Bank – known as the Troika – famously visited Athens regularly to check progress on its bailout commitments and decide whether to release the next tranche of loans.
“We will help, we must help, it’s also in our own interests,” German Foreign Minister Heiko Maas told ARD on Friday. “There are opportunities via the ESM – and without using instruments of torture – to financially cushion everything to do with coronavirus.”
On Thursday, French Finance Minister Bruno Le Maire said the ESM should be made available as a source of financing to countries with only minimal conditions attached and without stigma for using it.
Last week, EU leaders gave finance ministers until April 9 to come up with ideas on how to finance the recovery after Germany and the Netherlands shot down a call from France, Italy, Spain and six other countries for a common debt instrument issued by a European institution.
ESM head Klaus Regling wrote in a guest article for newspapers including Germany’s Frankfurter Allgemeine that in the short-term and at least in 2020, existing institutions such as the ESM, the European Commission and the European Investment Bank (EIB) should use their existing financial instruments to help support the bloc.
“To create new European debt instruments, you need either capital, guarantees or the assignment of future tax revenues and a functioning legal and administrative system. So it’s best to use the existing institutions and tools, which have successfully raised large sums of money on the market for years,” he said in the article, which was first published on Thursday evening.
France, Italy, Spain and six other countries called last week for work on a common debt instrument issued by a European institution to cushion the effects of the pandemic, which is on course to trigger a global recession. Germany and the Netherlands strongly opposed the proposal.
Regling said the ESM’s most suitable tool for the current crisis was probably preventative credit lines.
Magazine Der Spiegel said, without naming its sources, that Berlin was prepared to increase the ESM’s funds if they proved insufficient – for example if Italy and Spain needed help at the same time. A doubling is being discussed, it said, adding that this would require a capital increase of the ESM.
A spokesman for the Finance Ministry said Germany was talking to its European partners, adding that as soon as there were further details they would be announced.
($1 = 0.9219 euros)
(Reporting by Michelle Martin; Editing by Sam Holmes, Kirsten Donovan and Hugh Lawson)