Eurozone backs 10-year credit lines for coronavirus costs

Countries have until end-2022 to obtain funds with the Commission watching how they’re spent.

Eurozone governments have until the end of 2022 to open credit lines from a shared bailout fund to pay health costs stemming from the coronavirus, finance ministers agreed Friday.

Countries tapping the European Stability Mechanism would then have 10 years to pay back the debt, under the preliminary agreement struck by the Eurogroup ministers in a short videoconference. Their leaders have asked for the credit lines to be ready by June 1.

Once ministers complete legal formalities, the ESM rescue fund — created during the government-debt crisis last decade — could offer as much as 2 percent of a country’s annual economic output. The European Commission would monitor how the money is spent.

“There are no other strings attached to the use of the facility,” Eurogroup President Mário Centeno said after the meeting.

Roberto Gualtieri, the Italian finance minister, hailed the agreement not to impose conditions such as economic and labor reforms, mandated in the fund’s original rules for government rescues. The prospect of such terms, along with opposition to shared bonds, had sparked outrage from Italy while it was bearing the brunt of the pandemic.

The ministers who sit on the ESM board could decide later to shorten or extend the end-2022 deadline to draw on the fund.

The credit lines are part of a three-pronged, €540 billion economic package that aims to protect governments, workers and companies from financial ruin because of the pandemic.

Treasury officials earlier this week tentatively agreed on a €100 billion jobless reinsurance plan that would compensate employees for lost income if their companies reduce working hours. This jobless initiative also ends December 31, 2022.

The European Investment Bank, meanwhile, is finalizing a €200 billion guarantee fund that can issue loans to cash-strapped companies.