REVIEW - Will EU's Corona Bonds Be Back With Vengeance?

BRUSSELS (Pakistan Point News / Sputnik - 18th April, 2020) The Italian, Spanish and French governments have not had their last say in the row with the North over the issuance of mutualized debt, despite the latter holding firm against the so-called corona bonds during marathon talks of finance ministers last week.

There have been fears about debt sustainability after the worst-hit southern countries stepped up borrowing to cope with the financially taxing coronavirus pandemic. Italy has already accumulated a national debt of over 130 percent, more than twice the limit of the Maastricht criteria.

But the South's repeated calls to pool EU debt fell on deaf ears of the "frugal four" � Denmark, Germany, Austria and Finland � who prefer channeling bailout money trough a specialized EU fund. Even outside the euro group countries such as Sweden, the Baltic states and the Visegrad Four oppose shared debt.

And yet, the discussion is not over. After the euro group announced a 500 billion euro ($543 billion) rescue package that made no mention of the euro bonds, French Finance Minister Bruno Le Maire said that a 'reconstruction fund' would be discussed at the EU summit on April 23. This fund could be based on corona bonds.

European Commission President Ursula von der Leyen left the door open to the idea of a common EU debt at the plenary session of the European parliament on Thursday when she presented to Italy the bloc's excuses for not having helped it at the onset of the health crisis.

This feeling of guilt, rightly felt by the head of the EU's executive body, may help the government of Italian Prime Minister Giuseppe Conte bring back corona bonds at the next virtual meeting of EU leaders.

'TOTAL CONFUSION' AMONG ITALIAN MEPs

The eagerness of Conte's government to mutualize coronavirus response debt contrasted sharply with the mood among the Italian members of the European Parliament, who failed to present a common front on a motion proposed by the Greens in a bid to bring the issue of corona bonds back to the table.

Pietro Fiocchi, a lawmaker from Brothers of Italy, the allies of Matteo Salvini's League, said the voting was "a mess," with the right-wing League and Silvio Berlusconi's Forza Italia voting against shared debt, the ruling M5S and their Democratic Party allies voting in favor of corona bonds, and the Brothers voting in favor of both corona bonds and national recovery bonds that would come on top of the existing public debt.

"In a few words, there was a total confusion among the Italian MEPs and the lack of a common project ... Nothing is being done for the crisis and everybody is attacking everybody else for political positioning, waiting for the government to fall.... Poor Italy!" Fiocchi concluded.

Marco Zanni, the head of the League delegation to the European Parliament, has defended his party's choice not to endorse corona bonds, saying this would correspond to the "total transfer of sovereignty to the EU."

"The Italian government is busy pursuing useless and harmful solutions for the Italians: Eurobonds means Eurotaxation, abandoning fiscal sovereignty, handing over the house keys to Germany and the troika," he wrote in a statement on Friday.

'TROJAN HORSE' FOR CORONA BONDS

The position of League of Matteo Salvini echoed that of other EU-skeptical parties in Europe, such as Germany's AfD and France's National Rally. Gilles Lebreton, a French member of the European Parliament from Marine Le Pen's National Rally warned that corona bonds would take the European Union a step closer to the "federalization."

"This is the exact opposite of our plans to restore national sovereignty of the European member states. Even if the position of Salvini and the League may seem too courageous in these times of scarcity, it is in fact logical," he told Sputnik.

Alice Weidel, who leads AfD in the German parliament, slammed the European Commission president's proposal to use the European budget for recovery financing, in place of jointly issued debt, as a front for corona bonds.

"The idea of a 'reconstruction fund' of 1 trillion Euros in the European budget ... is a Trojan horse for Eurobonds. The calls from Italy and Spain for corona bonds are nothing more than a communalization of debt through the back door in the slipstream of the corona crisis," she said to Sputnik.

She argued that Eurobonds were illegal and did not "represent solidarity." Instead, they served to disempower nation states, who are each responsible for their own state budgets and their own state finances.

"With her weakness and disorientation, Frau von der Leyen is on the verge of blowing up the EU. Once the debt in trillions has been created, the door is open to further insatiable demands. Then the formal limitation of liability will quickly become just a word," Weidel said.