“One of the proposals is coronabonds.... it’s one way of ensuring liquidity at a good price for all countries, but there are quite a few other ideas that are being aired right now. We have a Eurogroup [meeting] on Tuesday. And I’m quite confident, in terms of solutions to this crisis, we will come up with good ways of ensuring that liquidity to all countries.”
Coronabonds would be debt issued at EU level with the funds used by member states to jumpstart their economies. Presumably the bonds would be cheaper for more fiscally-troubled states to pay back, because countries like Germany, Luxembourg and the Netherlands pay much lower interest rates than nations such as Greece and Italy. Last week, Luxembourg supported common debt issuance with several other EU members (see CNBC, Euronews and Financial Times).
The finance minister was then asked “who will pay” for the EU’s mooted covid-19 “Marshall plan” (see EUobserver, The Guardian and Reuters). Gramegna told CNBC:
“The good thing is, in this very difficult period, that interest rates are very low. So, I think a lot of this will be handled through loans that can be given at very low interest rates. We also know that the European Central Bank is ready to buy up sovereign loans in a very huge quantity. And if you add to that that the European Stability Mechanism has €410bn ready to be used in such a crisis, you realise that the money is available to finance, is available for coping with this.
“And let’s not forget that this crisis is a very short one. In the sense that it’s a kind of a V-shaped crisis. It goes down very quickly, because it was provoked by a virus. But it’s also possible, and we do everything that we can in Europe to make that it happens that way, that we can restart the economy very quickly.”
Gramegna reckoned that “the key programme” in the EU is the “Sure” initiative, which if passed will help finance short-time working schemes across the bloc.
Earlier in the interview, Gramegna cited Ursula von der Leyen, European Commission president, who said that announced EU and member state stimulus packages collectively added up to €2.8trn, similar in size to the US programme.