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Euro zone finance ministers last week signed off on the details of cheap, long-term credit lines to be made available by the ESM to countries that need cash to cover extraordinary health costs caused by the coronavirus outbreak.
The ESM played a key role in the rescue of Greece, Cyprus, Ireland, Spain and Portugal during last decade’s debt crisis in the euro zone. But it came at the cost of stringent austerity programmes for those countries.
That has left many in Italy’s 5-Star, the largest party in its ruling coalition, opposed to using ESM loans, fearing that more austerity measures will be imposed on the country. The ESM has repeatedly guaranteed that money would flow with no strings attached.
ESM head Klaus Regling rejected concerns about Italy’s high debt.
“We know Italy’s debt burden is high. But we also know that interest rates are low at the moment,” dpa quoted Regling as saying.
Italy alone could save 7 billion euros ($7.6 billion) in interest rates over the next 10 years and Spain some 2 billion euros, he said.
Regling told dpa the pandemic was different from the euro zone debt crisis when aid was linked to austerity.
“It is a crisis not caused by wrong policies. No government can be held responsible for what is happening now,” he said. Consequently, there would be no condition other than the requirement that the money be spent on health care spending.
The ESM will offer credit lines worth 2% of the requesting country’s gross domestic product, and up to 240 billion euros for the whole region. The loans will be made available in the coming weeks, pending procedural approvals, and until the end of 2022.