Finance Minister Edward Scicluna yesterday described the €500 billion emergency response plan agreed to by EU finance ministers on Thursday as a “fair compromise”.
The package is aimed at helping those European countries hit hardest by the novel coronavirus pandemic, such as Italy and Spain.
Scicluna told Times of Malta the agreement would see the European Stability Mechanism (ESM) borrow money on the international market and lend it to countries through credit lines.
“The ESM is there to provide bailouts and these are exceptional circumstances where underutilised capital is being used to provide credit to those countries which are hard hit by the pandemic, especially those which are highly indebted,” Scicluna said.
“It provides additional guarantees which will be passed partly to the banks to lend more and without restrictions.
“Funds will be required if companies falter for reasons tied to the crisis. Highly indebted countries will find it difficult to borrow so this will provide the necessary guarantees.
If they were to require a bailout we cannot turn our heads the other way
“Even if this agreement seems important only for our southern neighbours, it is important for us too since if they were to require a bailout we cannot turn our heads the other way. As a union we are in it together,” he said.
The rescue plan includes €240 billion made available to guarantee spending through the European Stability Mechanism as well as €200 billion in guarantees from the European Investment Bank
Although Malta is in a stronger position since its debt was brought down from 70 per cent to 40 per cent of GDP, other countries such as hardest-hit Italy and Spain are struggling hard to cope amid the COVID-19 outbreak.
Portuguese Finance Minister and president of the Eurogroup, Mario Centeno, said the agreement contained “bold and ambitious proposals that would have been unthinkable just a few weeks ago”.
He added: “We can all remember the response to the financial crisis of the last decade, when Europe did too little too late. This time around is different.
“Today we have answered our citizens’ call for a Europe that protects.”
And French Finance Minister Bruno Le Maire tweeted after the talks: “Europe has decided and is ready to meet the gravity of the crisis.”
Yesterday, he warned that France’s economy is expected to shrink six per cent this year, even with the country’s own €100 billion relief plan.
At Thursday’s meeting, EU finance ministers put aside proposals by France and Italy for pooled borrowing.
And The Netherlands let the deal come through after pushing hard for Italy and other affected countries to undertake economic reforms.