Italy has called on the EU to use its powerful economic rescue fund to extend credit lines to all member states to fight “a global shock that has no precedents in modern history” as the death count from coronavirus in Italy overtook China for the first time.
Giuseppe Conte, Italian prime minister, told the Financial Times that the European Stability Mechanism, a €500bn fund that was established in 2012 during the eurozone’s sovereign debt crisis, needed to be put into action to urgently respond to the virus outbreak that has claimed more than 3,400 Italian lives so far.
His call came as France also demanded urgent joint action across the eurozone, imploring reluctant countries led by Germany to join forces and back the use of the ESM or permit the issuances of common bonds in the fight against the crisis. Bruno Le Maire, French finance minister, warned in parliament that “either the eurozone responds in a united manner to the economic crisis and emerges stronger, or it is all over the place and is in danger of disappearing.”
The European Central Bank intervened in stricken markets on Wednesday night as it launched a late-night plan to buy an additional €750bn in bonds. The move delivered a boost to shattered investor confidence, but some officials fear it could reduce the pressure on cautious eurozone states, led by Germany, to take co-ordinated budgetary action to fight the economic crisis caused by the coronavirus pandemic.
“The ESM was crafted with a different type of crisis in mind, so it must be adapted to the new circumstances so that we can make use of its full firepower,” Mr Conte said. “The route to follow is to open ESM credit lines to all member states to help them fight the consequences of the Covid epidemic, under the condition of full accountability by each member state on the way resources are spent”.
France echoed Mr Conte’s calls for greater solidarity as officials in Brussels continued to work on plans for deploying the ESM in the fight against a deepening recession in the region. “Do we breach the taboo on European financial solidarity?” asked one French official. “Are we capable of financing together? Are we ready to do it?”
On Thursday official numbers confirmed that Italy overtook China as the country with the largest number of coronavirus deaths, with the total rising to 3,405.
Mr Conte, who was a little-known legal academic with no history in Italian politics when he was unexpectedly thrust into the position of prime minister in 2018, has earned the approval of voters during this crisis. A national opinion poll published this week showed that seven out of 10 Italians regarded him favourably and were impressed by his handling of the outbreak.
“We are confronted with an exogenous, global shock that has no precedents in modern history,” he said. “And as political leaders we are called to make necessary, bold, yet tragic choices.”
Mr Conte praised the moves taken by the ECB this week, but said more must be done to tackle a downturn that economists fear could be even sharper than the last financial crisis.
“Knowing President [Christine] Lagarde and having had several conversations with her I had little doubt — the ECB has the will and the power to support the euro and it will do so now and in the future. Monetary policy alone cannot solve all problems, we need to do the same on the fiscal front and, as I already mentioned, time is of the essence”.
Mr Conte said that “the best, probably the only way” to stave off large-scale economic damage in Europe would be the creation of a common European debt instrument to “fight against the socio-economic consequences of the pandemic”.
“What we need is not just a co-ordinated reaction but a bold European reaction to sustain our economies,” he said. “This bond will allow all European countries to access finances at the same conditions, and will put the whole European economy on the best footing to recover rapidly once the emergency will be over.”
Italy was the first country in Europe to impose stringent restrictions on the movement of people and its economy to combat the spread of the coronavirus. France and Spain subsequently followed Rome’s lead in enforcing social distancing measures.
“Unfortunately, other European countries are now starting to go through the same predicament we had to suffer for the past several weeks. And I can tell that every single day is a heavy one. I express all my solidarity to the peoples and to the leaders that are now confronted with the terrible situation that I and the Italian population already endured”.
Mr Conte said that “the Italian example” of fighting back against the virus was helping other nations in their response, but that it was too early to say if Italy’s restrictions would be lifted as originally planned in early April.
“Many countries are following these steps, the Italian example, if you like. This is an unprecedented situation. It affects all of us,” he said. “Unfortunately, it is not possible to predict when we will be able to return to normality. Only in a few days, and based on the evaluations of technical-scientific committee, I will be able to assess the effectiveness of the measures we took.”
Mr Conte warned that if Europe failed to make a robust and unified response to the virus it risked emboldening nationalist politicians on the continent and weakening support for the EU.
“Europe must show unity and solidarity, there is no alternative to this,” he said. “If Europe fails, I fear it will fade away in the conscience of our fellow citizens, giving space to the worst nationalistic instincts. This is a different virus that we need to defeat now”.