Saturday, July 11, 2020

Corona emergency aid from the euro rescue fund finally approved.

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Olaf Scholz (SPD), Federal Minister of Finance

Federal Minister of Finance Olaf Scholz praised Europe’s rapid joint response to the Corona economic crisis

(Photo: dpa)

Luxembourg The euro area countries can use Corona relief loans amounting to 240 billion euros from the ESM rescue fund. The Board of Governors of the European Stability Mechanism (ESM) in Luxembourg – that is, the finance ministers of the euro zone – finally approved on Friday the establishment of precautionary credit lines for all euro countries. Interested parties can now apply for help.

The ESM aid is part of a € 500 billion package that the EU countries agreed in April. After the agreement of the Eurogroup on the last details and the approval of the Bundestag, the starting signal from Luxembourg was the last step.

The loans are open to all 19 euro countries. The only condition is that the money goes into direct and indirect health costs related to the Covid 19 pandemic. The scope can be up to two percent of the respective gross domestic product.

The ESM, which was founded in the euro crisis in 2012, is endowed with capital and guarantees from the countries of the monetary union and can borrow money very cheaply on this basis. According to the ESM, the financing costs are currently close to zero. These loans are passed on to the euro countries at equally favorable terms.

This is particularly beneficial for those countries that would have to pay higher interest rates on the capital market due to high levels of debt, such as Italy and Spain. So far, no country has applied for aid.

Federal Minister of Finance Olaf Scholz praised Europe’s rapid joint response to the Corona economic crisis. The crisis aid was launched in record time, the SPD politician said before a meeting of the Eurogroup on Friday. “Today is a good day for Europe.”

He referred to the package agreed in April in the amount of up to 540 billion euros with help for short-time workers, companies and for the euro countries. The loans from the Euro bailout fund ESM would now be available and the short-time worker program Sure was on its way. The third element of the package, a European guarantee bank for corporate loans from the European Investment Bank, must also be implemented quickly.

Regarding the planned European reconstruction program, Scholz only said that there was broad consensus that an economic stimulus was necessary after the crisis and that this should be quickly implemented. It should serve to support growth, competitiveness and green investments.

More: We now need a plan for the economy – without strong lobby interests

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