The EU finance ministers urge banks to maximally support their customers affected by the coronavirus outbreak. The finance ministers request the banking sector to use their free capital and available profits to extend loans or provide other urgent financing, both for households and businesses.
The banks are in a significantly better position than during the previous crisis, having built buffers and arranged various safety nets. This makes it less likely that banks will collapse and the taxpayer will have to bear the cost. The ministers also endorse the recent decision of international banking supervisors to apply the rules as flexibly as possible for the time being. New capital requirements have been postponed by one year.
Europe, in addition to the agreed package of half a trillion euros, still needs at least 500 billion euros from the institutions of the European Union to finance the economic recovery after the coronavirus pandemic. In an interview with the Italian newspaper Corriere della Sera, Klaus Regling, director of the European Stability Mechanism (ESM), said that the easiest way to organize such funds would be through the European Commission and the EU budget.
“I would say that for the second phase of the economic recovery we will need at least 500 billion euros from the European institutions, but it could be more,” Regling told the newspaper. The finance ministers of the European Union reached an agreement last week on safety nets for countries, companies, and individuals totaling 540 billion euros. They also agreed that the eurozone, which according to the IMF will enter a 7.5% recession this year due to the pandemic, will need money to recover.
The EU leaders will discuss the recovery plan and the required financing later this week during a video conference. The idea around which a compromise can form likely involves the European Commission borrowing on the capital market secured by the long-term EU budget, using the money as leverage over the coming years as collateral for loans to achieve a greater effect.
German Minister Gerd Müller of Development Aid calls on the European Union to also support countries in Africa and the Middle East during the corona crisis with a aid program worth 50 billion euros. So far, the EU has pledged 15 million euros in support for developing countries. Europe must also contribute internationally to control the pandemic, Müller said Sunday in several German newspapers. The EU’s own aid package amounts to 500 billion euros but, according to the CSU politician, it is only inward-looking.