News & Politics

EU Coronavirus Bailout Talks Stalled Over Aid to Debtor Nations

EU Coronavirus Bailout Talks Stalled Over Aid to Debtor Nations
(AP Photo/Francisco Seco)

Several northern European countries are balking over terms in the European Union’s proposed $860 billion bailout package that would give debtor nations like Spain and Italy a pass if they misuse the funds.

Dutch Prime Minister Mark Rutte met with German Chancellor Angela Merkel and French President Emanuel Macron last night but the trio failed to break through the impasse that has developed as Rutte and 3 other “frugal” northern European countries are insisting that more of the aid package be in loans rather than handouts. The meeting was not getting anywhere, both Macron and Merkel walked out.

At issue is the same issue bedeviling the U.S. Congress as it ponders a bailout of states. Should states like Illinois and New York who have been fiscally irresponsible get bailed out of the fiscal mess with pensions and the budget that predates the pandemic?

In the case of the EU, Italy, Spain, and Portugal are all in deep debt and their banks have already been bailed out. Rutte wants specific reforms in place in those countries before any money is disbursed.

Brussels Times:

According to Rutte, countries like Spain and Italy, but also France, have promised to initiate economic reforms and make cuts to state costs like pensions before receiving financial help from the EU, but Rutte says that none of these promises have ever been kept. His conditions would guarantee that this time, the promised reforms will be fully implemented.

In order to access the funds, Rutte wants the three countries to present and initiate concrete plans for economic reforms. The content and execution of the reforms will be decided by the member states themselves. He emphasised that their respective state finances and budget plans should also be improved so that there will not be any calls for financial help in future crises.

“Austerity” measures have fallen out of favor in debtor nations. Too much pain, too little gain. Greece nearly had a revolution over the EU-imposed austerity plan that it was forced to adopt in order to receive bailout aid. Rutte and other states, including Austria, Sweden, and Denmark want to shift responsibility for the pain from the EU to the nations themselves.

At the special European Council meeting, state leaders will be discussing ways to distribute the funds. In the proposal, the European Commission sees amounts starting from €500 billion as a subsidy, and states that amounts of €250 billion will be treated as loans.

The Netherlands is supported in its demands for reform by Austria, Sweden and Denmark. These reforms can include local revisions on spending in the fields of education, care for the elderly and the job market. Only once these reforms would come into effect will Spain, Portugal and Italy be able to access the relief funds, Rutte proposes.

I can’t imagine any of the debtor nations drinking the hemlock of austerity themselves. It will have to be imposed on them. And given recent history, that isn’t likely.

Interestingly, Rutte and other EU countries want to make “democratic reform” one of the conditions for aid. This isn’t sitting well with Hungary’s strongman Viktor Orban who feels singled out for his government’s crackdown on free speech and his announcement that he will rule by decree.


“What’s going on is a little bit strange because there is a 100% agreement on the rule of law,” Orban said. “If somebody is not ready to accept the rule of law [they] should leave the European Union immediately. They should not be punished by money.”

He said “these guys who inherited freedom, rule of law and political democracy” did not have the experience that he and others in eastern Europe had fighting against communism.

That may be true, but if other “freer” EU nations want to put their societies under a microscope, no one would get a penny.

The differences between Rutte and the rest of the EU will be papered over, as always, and some agreement will be announced with much fanfare. The debtor nations will get their goodies and not be forced to reform. Everyone else will pat themselves on the back over a job well done.

Meanwhile, the debt bomb is ticking again and is liable to go off before too long.


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