Europe’s ‘frugal four’ must help south, Conte warns
The Italian PM has warned Brussels that the EU faces collapse if the rich northern states fail to financially bail out the south.
Italian prime minister Giuseppe Conte has warned Brussels that the European Union faces collapse if the rich northern states fail to financially bail out the south.
Both Italy and Spain have urged four states dubbed the Frugal Four — Germany, Austria, the Netherlands and Finland — to support those countries ravaged by the coronavirus with the issuing of financial instruments called corona bonds.
The corona bonds would be joint debt of the EU and help Italy and Spain, as well as other hard-hit southern European countries like Greece and Portugal, deal with the sharp collapse of their economies due to hard lockdowns.
But so far The Netherlands and Germany — both with tenuous coalition governments — have led fierce resistance to issuing corona bonds because they don’t want to have to guarantee the debts of fragile economies.
They have pointed to the stimulus of the European Central Bank, which is purchasing €750bn of bonds throughout 2020 and lowering lowered borrowing costs for euro zone countries, as ways for the southern states to manage the crisis.
Dutch prime minister Mark Rutte is leading the hardliners. He has said issuing corona bonds would “bring the euro zone into a different realm”, likening it to a transfer union.
“I cannot foresee any circumstances in which we would change that position (to oppose corona bonds),” he added.
But Mr Conte, who called the coronavirus pandemic “the biggest test since the Second World War,” said the EU needed to rise to the challenge. Over the past week he has threatened Italy would go it alone, refusing to accept any disciplinary terms as a condition for loans.
“If we do not seize the opportunity to put new life into the European project, the risk of failure is real,” Mr Conte told the BBC on Thursday. He had earlier told the German newspaper Bild — in a blunt message to the German chancellor Angela Merkel — that the EU could even be written off.
“There’s no benefit to Germany if Europe falls into recession. Our economies are being put to the test. We need to develop fiscal instruments to respond. We are not demanding that Germany and the Netherlands pay our debts.
“We must not fall behind in competition with the US and China. They are now each providing 13 per cent of their GDP. I’m calling for the fiscal rules to be relaxed. Otherwise we’ll have to write off Europe and everyone will do their own thing. We can’t end up with ‘operation successful: patient dead’.”
Mr Conte, whose country faces a drastic contraction of more than 10 per cent of GDP as Italian deaths linked to coronavirus reaches 17,000, urged “all peoples of Europe to help each other”, promising that when countries were better off, they would then help others again.
“We have to put aside selfishness in this crisis. All countries will be affected. Europe isn’t just about the economy, Europe is also about human dignity,” he said.
Spain’s prime minister Pedro Sanchez has also demanded action from the EU, saying it was “now or never” for seamless solidarity.
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