EU considers deploying emergency fund to aid in coronavirus crisis

The European Union is considering deploying the European Stability Mechanism to help combat the coronavirus crisis.

Eurozone member states are debating whether to use the €500bn emergency fund with member states divided on the subject.

The European Stability Mechanism is the most powerful economic rescue fund extant in the bloc and there are differences of opinion regarding how soon and under what conditions it should be used.

Officials are examining the ESM’s options, including the idea of offering credit lines to multiple member states, reducing the stigma that would be attached if a single government made a request.

Using the credit lines of the ESM also requires buy-in from a number of national parliaments as they have to agree to respect the bloc’s rules, not least the budget guidelines.

Klaus Regling, ESM managing director, said on Monday night that his institution was ready to examine ways it could help.

Among the countries against using the fund are Germany and the Netherlands as they are worried it could send the wrong signal and further sap investor confidence.

On Tuesday night, French president Emmanuel Macron suggested to fellow leaders that the ESM could issue joint coronavirus bonds as part of the crisis response.

One of the benefits of using the ESM is that it can bring to bear the European Central Bank’s hugely powerful Open Market Transactions programme of bond purchases.

This programme allows the ECB to buy unlimited amount of a Eurozone country’s bonds as part of an official ESM-backed bailout.

The ECB alone would be responsible to decide whether to activate the programme.