Euro zone crisis response must include solidarity fund - France

PARIS (Reuters) - France cannot accept a European response to the coronavirus crisis that does not include long-term recovery measures like a joint EU solidarity fund of the kind Paris has proposed, its finance minister said on Monday.

FILE PHOTO: French Finance Minister Bruno Le Maire looks on during a meeting at the Finance Ministry in Athens, Greece, February 25, 2020. REUTERS/Costas Baltas

EU leaders have tasked their finance ministers with coming up with plans to soften the economic fallout from the coronavirus outbreak, after they failed to overcome divisions last month over whether a response should be financed by joint borrowing.

Euro zone finance ministers are likely to converge on Tuesday on three quick options to support the economy - use of the European Stability Mechanism bailout fund, the European Investment Fund and the European Commission’s short-time work scheme.

“There is an agreement emerging on the first three options, but that is not enough,” French Finance Minister Bruno Le Maire told journalists ahead of the meeting with his euro zone counterparts.

Le Maire has proposed in addition a fund worth “several hundred billion euros” financed by joint borrowing that would be used to fund public spending for the economic recovery after the current downturn.

“I hope that tomorrow the door will be open to include this sort of instrument in the global response that we finance ministers are going to give to the heads of state,” Le Maire said.

Countries in northern Europe, including Austria, Denmark, Finland and the Netherlands, refuse to back an agreement that would allow joint borrowing over fears that it would leave them on the hook for the debts of more profligate states in the south.

Le Maire hopes to overcome that opposition by proposing that the fund’s operation be limited to five to 10 years and be strictly focused on financing the recovery.

He said that it could be used for public spending on hospitals or financing investment in industries hit particularly hard by the downturn, like car manufacturing or aerospace, citing the example of European plane maker Airbus AIR.PA.

The fund would be structured as a special purpose vehicle holding resources countries could tap into based on how much they had suffered during the crisis. Contributions would be based on the size of each country’s economy.

That would mean that Italy, among the countries hardest hit worldwide by the outbreak, would get more out of the fund than it paid in.

Reporting by Leigh Thomas; Writing by Matthieu Protard; Editing by Catherine Evans and Jan Harvey