Brexit and an €540bn EU financial rescue package for Coronavirus- hit EU member states
Late on 9 April 2020, the Eurogroup of 19 Eurozone countries announced an EU - supported €540bn financial rescue package for countries within the EU hardest - hit by the coronavirus pandemic. This includes Spain, Italy and France which have had the highest number of reported coronavirus-related infections and deaths within the EU.
It is not entirely clear from the reported announcements whether and to what extent the rescue package extends to the 8 EU countries outside the Eurozone but the package certainly seems to have the backing of the EU as a whole, as exemplified by the supportive announcement by Charles Michel, President of the European Council, There is no suggestion that it extends to the UK at all, which is outside the EU but continues to be part of the EU single market and to pay into the EU budget during the UK-EU Withdrawal Agreement transition period due to end on 31st December 2020.
The financial rescue package is reportedly made up of €240bn of credit lines via the so-called European Stability Mechanism, a new €100bn scheme proposed by the European Commission to help fund employees' salaries if they are put on reduced hours and the balance of €200bn in increased lending capacity from the European Investment Bank.
The discussions leading to the deal are reported to have been "messy" but eventually countries such as Italy, France and Spain agreed to defer until another occasion (probably 23 April 2020 when EU leaders are due to meet - almost certainly by teleconference) their proposals for the issue of so-called "coronabonds" on a shared debt basis - proposals which are currently opposed by wealthy northern EU member states such as the Netherlands and Germany. These opponents in turn apparently agreed not to push at this time on their "economics surveillance" proposals as a condition of agreeing the financial recue package.
The arguments, which reportedly characterised the discussions leading to the last-minute compromise, were described by some participants as posing an existential threat to the unity of the EU and certainly once again highlighted the differences between some northern and some southern EU countries, whose economic profiles are affected by somewhat different stress factors.
Why is this all relevant to Brexit? The on-going discussions between the UK and the EU would undoubtedly be affected by differences within the EU itself on economic and financial issues as well as by developing priorities which the EU might wish to accord to matters other than the Brexit-related discussions. This goes to the heart of the UK-EU dynamic and the question of how important the UK and the EU are to each other as other events inevitably absorb the attention of policy-makers within both camps.
The argument of the UK Government for sticking to the deadline of 31 December 2020 as the end date for the transition period is inevitably linked to the UK Government's wish to keep everybody focused on the UK- EU debate before everybody loses interest and the discussion drifts. Whether this approach is realistic in the light of the coronavirus emergency is, however, another story.
