EU Ministers Inch Toward Rescue Deal as Virus Tightens Grip
Pandemic Grips Europe as Spanish Deaths Rise and Economy Slumps
(Bloomberg) --
Euro-area finance ministers took a small step toward a rescue package for struggling member states on Tuesday as fatalities climbed in Italy and Spain and evidence piled up of the coronavirus’s crippling economic impact.
After a two-hour teleconference, finance chiefs were able to put some detail on a proposal to activate the bloc’s bailout fund without settling the differences that are holding up the money.
The European Central Bank’s latest bond-buying pledge has restored stability to financial markets and eased some of the pressure on ministers. But there’s no sign yet of the pandemic peaking.
Governments around the world are trying to cope with an influx of patients into hospitals and the effects on economies of keeping everyone indoors. The French and German governments are looking at more measures to help companies stay afloat and pump money into the system once the risk eases, on top of aid already committed.
Italian authorities reported that another 743 people died in the past 24 hours while Spain saw its grimmest day yet as the virus claimed 514 victims despite strict rules keeping people in their homes. Italy and Ireland tightened their restrictions on movement and Britain spent its first day in lockdown.
The finance ministers’ plan to tap the European Stability Mechanism’s 410 billion-euro ($440 billion) war chest did start to come into focus on Tuesday.
There is now “very broad support” for allowing member states to borrow about 2% of their GDP from the ESM, Eurogroup President Mario Centeno said. But the ministers didn’t agree on more specific elements of how these credit lines would work as was originally expected.
The conditionality attached to the loans remains a particular sticking point that European leaders will have to address when they hold their own call Thursday.
“The deal outlined but not finalized by Eurogroup finance ministers falls short of the required signal of unique solidarity in a unique crisis,” Holger Schmieding, chief economist at Berenberg in London, said in a note to clients. “Solidarity that is perceived as not sufficient enough may risk a dangerous anti-EU backlash.”
Governments and central banks have pledged massive stimulus to cushion the blow and protect jobs, yet politicians and policy makers are unlikely to be able to stave off a deep recession this year.
Across Europe, companies are taking a financial battering not seen in decades as the curbs on businesses and households bite. The first major data outlining the damage showed demand plunging at a record pace, activity shrinking and sentiment worsening.
Despite the gloomy outlook, the Stoxx Europe 600 Index rallied Tuesday and U.S. stocks surged, with the Dow Jones Industrial Average up more than 11% to register its biggest advance since 1933.
Italy, the epicenter of the outbreak on the continent, saw the death toll rise for the first time in three days, dashing hopes the disease might begin to decline in a country where hospitals are bursting at the seams and the government is struggling to bring the crisis under control. Still, the number of active cases rose the least in nearly a week, a possible early indication that severe restriction of movement is slowing the spread.
Confirmed Italian infections now total 69,176, civil protection authorities said in Rome. In Spain, fatalities increased to 2,696, from 2,182 the previous day, and the number of confirmed cases rose to just shy of 40,000.
Italian Prime Minister Giuseppe Conte’s cabinet on Tuesday approved fines of up to 3,000 euros for violations of the lockdown, as well as a measure allowing for its extension to July 31 if necessary. Economically, the country is in turmoil, with almost all industrial production shuttered.
Independence Rebels
Evoking the spirit of the rebels who fought for independence in 1916, Irish Prime Minister Leo Varadkar said Tuesday the nation needs to do more to fight the spread of the virus. In addition to extending the current restrictions -- including school closures until April 19 -- he said no more than four people at a time should gather outside.
The government also added 3.7 billion euros to its package to support the economy, on top of the 3 billion euros already announced.
The U.K. could tighten its lockdown measures if more action is deemed necessary after Prime Minister Boris Johnson ordered people to stay at home. The government will open a temporary hospital with space for 4,000 patients in east London next week as health chiefs warned that intensive care capacity could be overwhelmed by then.
In France, Health Minister Olivier Veran said the nation’s lockdown could stretch up to six weeks, though it’s impossible to say when it might end and it will “last as long as necessary.” Total deaths rose Tuesday to 1,100, with 22,300 confirmed cases and 2,516 patients in intensive care.
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