France says EU recovery fund to be financed by joint debt

PARIS (Reuters) – European finance ministers have agreed to a post-crisis economic recovery plan opening the door to jointly issued debt, France’s finance minister said on Thursday, hailing what he described as a French success.

Bruno Le Maire said after talks with his euro zone counterparts that European Union member states had agreed to mobilise 1 trillion euros to shore up the economy in response to the coronavirus crisis, in the most important economic plan in the EU’s history.

Le Maire said on a call with reporters that the European Stability Mechanism will be activated with light conditionality, which could help a country such as Italy that is struggling with high borrowing costs.

He also said the agreement will make 500 billion euros available immediately and that a recovery fund worth about another 500 billion euros would follow and which would be financed by borrowing.

“Who’s going to raise the debt? There’s a lot of uncertainty that remains to be determined. But I have a firm conviction that the fund will see the light of day and there will be debt raised jointly in a form that remains to be determined,” Le Maire said.

He added that the agreement document’s reference to innovative financial instruments, which was the object of negotiations during 15 hours, opened the door for the first time to jointly issued debt.

“It means what it means. The only instrument that does not yet exist in European financing is joint debt,” Le Maire said.

Germany and France overcame opposition from the Netherlands to the crisis plan during the marathon talks, but only by avoiding an explicit mention of jointly issued debt in the final agreement.

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