Governments from the 19 countries that use the euro overcame sharp differences to agree Thursday on measures that could provide more than a half-trillion euros ($550 billion) for companies, workers and health systems to cushion the economic impact of the virus outbreak.
Mario Centeno, who heads the finance ministers' group from euro countries, called the package of measures agreed upon "totally unprecedented ... . Tonight Europe has shown it can deliver when the will is there."
The deal struck Thursday among the finance ministers did not, however, include more far-reaching cooperation in the form of shared borrowing guaranteed by all member countries.
The officials left that issue open, pushing the question to their national leaders to sort out down the road as part of a further discussion about a fund to support the economic recovery in the longer term. Still, Italian Finance Minister Robert Gualtieri tweeted that shared borrowing through "eurobonds" had been "put on the table."
Borrowing together to pay for the costs of the crisis was a key demand from Italy, Spain, France and six other countries. Italy and other indebted members are expected to see their debt load increase because of the recession caused by the virus outbreak. But shared debt was rejected by Germany, Austria and the Netherlands. Netherlands Finance Minister Wopke Hoekstra tweeted that "we are and will remain opposed to eurobonds."
The question now is whether the package will be seen as big enough to impress markets and enable eurozone governments to handle new accumulations of government debt from the recession. The concern is that increased borrowing could in the longer term trigger a new eurozone financial crisis like the one that threatened the currency union in 2010-2015. For now, bond-market borrowing costs of indebted countries such as Italy are being held in check by the European Central Bank, which has launched an 870 trillion-euro bond purchase program. But that program is so far limited in size or duration.
The ministers agreed that hard-pressed governments such as Spain and Italy could quickly tap the eurozone's bailout fund for up to 240 billion euros ($260 billion), with the condition that the money is spent on their health care systems and the credit line expires after the outbreak is over. A dispute over conditions had held up a decision at a conference Tuesday.
The agreement also provides for up to 200 billion euros in credit guarantees through the European Investment Bank to keep companies afloat and 100 billion euros to make up lost wages for workers put on shorter hours.
Centeno said that countries would work on a recovery fund for the longer term and as part of that would discuss "innovative financial instruments, consistent with EU treaties." He said that some countries support shared borrowing and that others oppose it.
The deal overcame bitter disagreement between Italy and the Netherlands over the conditions for loans from the bailout fund, the European Stability Mechanism. Italy had rejected the idea of using the fund because of the ESM's requirement that the money come with conditions to reform. That recalled the tough conditions imposed on Greece, Ireland and other indebted eurozone countries that were bailed out during the eurozone debt crisis.
The compromise struck in the final statement says that countries could borrow up to 2% of annual economic output at favorable rates to finance "direct or indirect" costs of the current health crisis. Centeno said during a post-decision video news conference that he expected countries to be able to identify enough health costs to access the money.
The package comes on top of extensive spending measures at the national level by member governments. The European Union has also taken the unprecedented steps of setting aside its limits on debts and subsidies by national governments to their home companies.