Issuing Eurobonds would “affect the fine balance” achieved by the Maastricht Treaty between having a common currency while safeguarding the sovereignty of European member-states over their national budgets, Dutch Ambassador to Greece Stella Ronner-Grubacic tells Kathimerini.
The Netherlands has turned down the proposal for a joint bond, proposing instead the creation of a joint European fund for battling the impact of the coronavirus with voluntary contributions from member-states. “The Netherlands is prepared to contribute the substantial amount of 1 billion euros,” she says.
The global economy is facing the risk of a recession that may surpass the downturn following the crisis of 2008. What will the impact on the European economy be and what should the eurozone economic policy’s main pillars be from now on?
It is difficult to predict the scale of the impact on the European economy. However, it is becoming more and more likely that we will be facing a recession, which will hopefully be limited to a short crisis followed by a swift recovery. Regarding the way forward, I don’t have a crystal ball, but this crisis does show the importance of continuing to build upon the instruments for strengthening the European Monetary Union which we have been working on together as European Union partners in the past years such as strengthening the European Stability Mechanism, the Banking Union and the Capital Markets Union. To enable this, continued reforms are needed, enabling efficient governments and a competitive business sector to realize economic prosperity, while strengthening our capacity to cope with the economic headwind. In that respect, I am very impressed with the way in which the Greek government has handled the crisis up until now, doing what needs to be done to support the economy and continuing to work on reforms where possible. This may also be a sign that the Greeks will be able to bounce back quickly once this pandemic is brought under control.
Some eurozone countries with limited fiscal capacity are urging debt mutualization through the issue of Eurobonds. However, some other countries, including the Netherlands, do not share the same view. What are the arguments against the issue of Eurobonds?
Clearly, the crisis that we face is unprecedented and the images of hospitals throughout the European Union affect us all. We are in uncharted territory when it comes to finding the medical response to this crisis. This does not mean, in our view, that we should resort to measures that fundamentally change the functioning of the EU and the instruments that we have set up in the past few years. Debt mutualization by issuing Eurobonds would, in our opinion, affect the fine balance agreed in Maastricht between having a common currency and maintaining national sovereignty over our budget and the way we finance it. In the Netherlands we believe that we should not throw this principle overboard and that we may be better served by exploring other options – options that are equally effective in addressing the health crisis and where, at the same time, there is a scope for all EU countries to feel comfortable with the outcome.
The bottom line is that we need to support the European healthcare systems. It would be unacceptable that a lack of financing could cause health systems in heavily affected countries to collapse. The Dutch proposal is to set up a so-called “corona fund,” with voluntary contributions from EU member-states. The money from this fund – grants, not loans or guarantees – could be used immediately to help people who are most in need. It is meant for hospitals, for medical equipment, for the most urgent appliances and products. The Netherlands is prepared to contribute the substantial amount of 1 billion euros.
So what are the next steps for shaping the appropriate policies? Are you concerned about the cohesion of the eurozone in the midst of this new crisis?
Covid-19 took us all by surprise, but the first response at the European level was quick and decisive. We are now working out the details of a more comprehensive response plan. Of course this discussion brings to light differences of opinion, but I expect we will be able to find common ground. We simply have to act together and help each other. When it comes to tackling the economic impact of Covid-19, there is a strong set of instruments available within the toolbox that we have built together during the past decade. The general escape clause of the Stability and Growth Pact, which we recently activated, offers the needed flexibility for member-states to provide the fiscal stimulus. This enables member-states to decide on their own national measures. The European Investment Fund will also provide significant support to the financial sector, and the European Investment Bank has the capacity to support continued investments. Furthermore, we support increased flexibility of cohesion policy as recently proposed by the European Commission, as well as using the remaining funds in the EU budget for the Emergency Support Instrument. Meanwhile, the European Stability Mechanism has the capacity to step in for further financial support if needed. We will need to discuss reasonable conditions for ESM financing. Finally, we must also keep in mind that other organizations and institutions besides the EU can also play a role: Both the International Monetary Fund and the World Bank have stepped up their involvement, so we should look at all possible options.
Greece is facing a pandemic but also a refugee and migrant crisis, which creates an explosive mix of challenges. In what further ways can Europe support the Greek effort at its external borders?
I fully agree with you that the combined challenge of a migration crisis and the coronavirus pandemic is a particularly dangerous one. Fortunately, the situation on Greece’s and the EU’s land border in the Evros region has been brought under control, thanks to the intervention of the Greek border patrol, police and army. On the islands, the current situation remains worrisome, also in view of the coronavirus crisis. The reception facilities are overcrowded, medical facilities are lacking and hygiene is inadequate. The Greek authorities have taken measures to prevent an outbreak, but the situation remains fragile. If an outbreak of the coronavirus in the camps were to occur, the consequences would be severe. Here, too, solidarity of EU partners is key. There are EU mechanisms through which Greece can ask for emergency support. Like it did last month. The Netherlands contributed with generators, tents, emergency blankets and pillows. The government has also made half a million of euros available for the International Federation of Red Cross and Red Crescent Societies’ regional appeal to assist refugees and migrants in Greece and neighboring countries.
The notion that Greece is not alone in coping with this also applies to the broader issue of migration. That is why the EU and my government have been supporting Greece with the management of migration, with asylum procedures and the protection of the external border. We will continue to do so, with the EU providing funds totaling some 3 billion euros while the Dutch government has also contributed with experts, for example on asylum procedures and for Frontex operations. I truly believe that a structural solution can be found in breaking the business model of smugglers and speeding up asylum procedures, improving reception conditions and increasing returns by the government. Steps are being taken in this direction and the Netherlands continues to support by sharing knowledge and expertise.