It was Thursday, and government heads had gathered for a virtual European Council meeting to back a joint statement on a coordinated strategy against the economic fallout of the coronavirus crisis. But too many hours had elapsed without an agreement, so Council President Charles Michel decided to take a recess with his team to seek some common ground.
Social distancing rules had made it necessary to hold the summit via video link, which many assumed would mean a short meeting to greenlight a joint statement full of good intentions and vague pledges. Instead, the summit extended over six hours, and witnesses have described it as one of the most fascinating summits in recent memory, filled with rhetorical battles and some dialectical backstabbing, and with four leading participants: Angela Merkel of Germany, Pedro Sánchez of Spain, Giuseppe Conte of Italy and Mark Rutte of the Netherlands.
I cannot accept this vague language or this talk about several weeks, when my country is in the grip of a health emergencyPedro Sánchez, Prime Minister of Spain
When Michel ended the recess, he thought the situation was back on track. By then, Conte had repeatedly threatened to block the declaration following resistance from Rutte and Merkel to a “coronabond” mechanism of joint EU debt to deal with the Covid-19 crisis. Seven other countries backed Italy and Spain’s position, including France.
Spain, Italy and France have been pushing for a new “Marshall Plan” that would involve extensive public investment in the continent. But this plan, originally proposed by Sánchez, is strongly opposed by Germany and the Netherlands, as well as Austria and Finland.
In the end, Sánchez and Conte refused to support the joint declaration, and their pressure forced the EU to agree to come up with a plan to address the crisis within 15 days.
A reconstruction of events by EL PAÍS based on testimony from several delegations shows the intensity of the clash.
Back from the recess, European Council President Charles Michel saw that Sánchez looked doubtful.
“Do we have a deal, Pedro?” he asked.
“No, Charles. I cannot accept this vague language or this talk about several weeks, when my country is in the grip of a health emergency. We have asked for a common unemployment insurance and you’re not giving it to me. The Eurogroup’s mandate needs to be clear,” replied the Spanish PM, alluding to the meeting of European finance ministers.
If what you’re waiting for is the coronabonds, they’re never going to arriveGerman Chancellor Angela Merkel
For his part, Conte rejected the notion of having struggling member states resort to the EU’s bailout fund, the European Stability Mechanism (ESM), as it could stigmatize countries much the same way that Greece was when it was bailed out in 2010. The ESM, said Conte, would be an unacceptable tool to deal with a crisis that nobody is to blame for and which is affecting everyone equally.
“It’s a very good tool. In the end it’s the one that’s going to help you. Don’t be so critical. If what you’re waiting for is the coronabonds, they’re never going to arrive,” said Merkel to Conte. “My parliament would not accept it. You are creating expectations that are not going to be met and sending out divisive messages.”
Spain’s Sánchez also had an open disagreement with Merkel.
“This is clearly insufficient. I can’t go back to my citizens with this right now. I need some clear language,” said Sánchez about the joint statement.
“Pedro, you’re wrong. You say the paragraph [about the ESM] means nothing, but there are people working on it, let them work,” said Merkel, alluding to the Eurogroup.
“Angela, I hear you, but it’s clearly insufficient. We’ve been here before. If we don’t give them a clear mandate, we know what’s going to happen. Do you not understand the emergency that we are going through?”
“Pedro, how can you say I don’t understand it?” replied Merkel sharply.
“I need you to understand the urgency of the moment.”
“Pedro, we’re at the limit ourselves. We’ve already made many compromises.”
The likely economic impact of the coronavirus crisis includes “a recession that could fall in the range of a 2% to 10% drop in GDP”
France’s Emmanuel Macron, say these sources, spoke up to back Sánchez. “Pedro is right. I’m with him in that we cannot shift our political responsibility to the Eurogroup. This is a political issue, we cannot leave it in the hands of the finance ministers.”
The likely economic impact of the coronavirus crisis includes “a recession that could fall in the range of a 2% to 10% drop in GDP,” according to Christine Lagarde, president of the European Central Bank, who also spoke at the summit.
In the end, the meeting ended in a stalemate between the nations that defend an ambitious European response and those that would rather see each member deal with the fallout individually – with a door left open for a middle-of-the-road solution involving the ESM. Spain is not as dramatically opposed to this tool as Italy: “It needs to be de-stigmatized,” said Spanish sources.
“The space between Merkel and Sánchez is the landing strip for the agreement,” said a diplomatic source. This suggests there could be a reinterpretation of the ESM rules in order to adapt it to a crisis that is not fiscal in nature.
EU sources admit that the lack of consensus over the creation of new tools like the coronabonds leaves the ESM as one of the few options available to Italy, and possibly to Spain down the line.
English version by Susana Urra.