20 April 2020

Merkel backs EU bonds to fight coronavirus crisis

German Chancellor Angela Merkel said she is in favor of issuing EU bonds via an existing clause in the union’s treaties to finance the bloc’s economic recovery from the coronavirus crisis.

German Chancellor Angela Merkel said Monday she is in favor of issuing EU bonds via an existing clause in the union’s treaties to finance the bloc’s economic recovery from the coronavirus crisis.

Speaking to reporters in Berlin, Merkel said the solidarity clause — under Article 122 of the EU treaties, which has already been used to propose a temporary unemployment reinsurance scheme — could be used to finance other forms of financial assistance for national governments.

But she remained skeptical toward the idea of a broader pooling of debt risk via the so-called corona bonds that southern countries such as Italy demand.

“We have already found an instrument in Article 122, paragraph 2, where bonds for countries can be passed on by means of guarantees from member states and then used, for example, to finance short-time working allowances,” she said, adding: “I can also envisage such instruments in the future.”

The chancellor’s remarks come ahead of a videoconference of EU leaders on Thursday, where they plan to endorse a first package of about €500 billion of financial assistance and also discuss plans for an additional recovery fund to cushion the economic fallout of the crisis.

Merkel’s comments lend support to an idea already being proposed in Brussels that would — unlike corona bonds — see the Commission issue bonds based on financial guarantees provided by countries through the EU budget. That could limit the amount of shared risk, and would also be designed to be temporary.

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