German Business Lobby Joins Italy in Call for Fiscal Solidarity

(Bloomberg) --

Germany’s leading business lobby partnered with Italian and French peers in calling for a joint European response to the continent’s economic crisis, in an unusual show of unity after the coronavirus pandemic triggered heated debates over burden sharing.

“The current situation will require a degree of public support unknown in peace time,” Germany’s BDI, Medef in France and Italy’s Confindustria said in a joint paper, as they called for “a strong element of true fiscal solidarity” for those countries most affected by the pandemic.

German business leaders and many politicians have so far mostly opposed the idea of sharing the financial burden between EU member states. Berlin has specifically resisted calls to introduce so-called coronabonds that would be jointly issued by member states.

The continent’s leaders are currently debating a proposal by the European Commission for a recovery fund that would be jointly financed by the bloc’s member states. The plan is contentious as member states argue about its size and if the money should be given to countries in the form of loans or grants.

The European business lobby groups are now calling for a “good balance of loans and grants to member states,” as they urge the European Union to significantly strengthen its mechanisms of state aid.

The coronavirus pandemic has sent European economies into a tailspin, with the euro-region forecast to contract 7.7% this year.

©2020 Bloomberg L.P.