Eurozone ministers review economic response as second COVID wave rages

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Eurozone finance ministers will review their economic response so far to the COVID-10 pandemic on Tuesday as a second wave of infections is likely to wreak fresh havoc on economies in coming months, but they are unlikely to promise more cash.

The ministers will hold a video-conference two days before the European Commission issues economic forecasts for the whole 27-nation European Union that are likely to predict shrinking economic output in the last quarter of the year.

EU leaders agreed in July to launch a 1.8 trillion euro recovery plan to boost the economy over the next seven years from the unprecedented slump this year caused by the pandemic.

The package is made up of 1.1 trillion euros in the EU’s next long-term budget and an additional 750 billion pool of money for 2021-2023 just to deal with the economic downturn.

“That will be a lot of money which will be moved around over the next years,” German Finance Minister Olaf Scholz, whose country holds the rotating presidency of the EU, told reporters.

The bloc’s governments and the European Parliament are now haggling over the details of the package with both sides blaming each other for delays.

“What we want to accomplish …is that the legislation is implemented by the end of this year so that the money will be available. That’s the task we are facing right now – and not reshaping things that have already been agreed on,” he said.

The support is needed because France, Germany, Belgium, Austria, Portugal and other countries have decided to tighten restrictions on people’s movement and closed non-essential businesses for the whole of November as the number of infections and hospitalisations of COVID-19 patients skyrockets.

“So it’s even more important now that there is a strong signal with the 750 billion euro recovery programme and the multi-year EU budget for solidarity and with it a clear perspective for the economic recovery,” Scholz said.

“We absolutely want to ensure that the funds are available everywhere the next year. A lot of countries urgently need this support which Europe jointly is ready to give.”

While pledges of more money are unlikely, the ministers have made clear they would keep national fiscal support for as long as is needed, especially as EU rules limiting the size of deficits and debt have been suspended because of the pandemic.

The ministers will also take stock of the 540 billion euro safety net for individuals, businesses and governments that euro zone governments set up in April.

The total comprises 100 billion euros in a part-time work scheme, of which 87 billion has already been allocated, and 240 billion euros worth of ultra-cheap lending to governments, all of which remains available.

There is also 200 billion in guarantees and liquidity support for companies from the European Investment Bank and so far about 11 billion has been activated.

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