Lagarde Asks European Countries To Support 'Coronabonds'

European Central Bank President Christine Lagarde asked eurozone finance ministers Tuesday to consider a one-off joint debt issuance of “coronabonds” to assist with the coronavirus pandemic, according to Reuters.

“Despite opposition from the Netherlands, it is likely that EU leaders will go ahead with this idea and announce some form of common EU issuance at their next meeting due on 26 March,” Christopher Dembik, head of macro analysis at Saxo Bank, said in a note. 

The ECOFIN council activated the “general escape clause” in the stability and growth pact, which suspends restrictions on borrowing and spending to deal with the COVID-19 outbreak.

Contrary to 2012 when Germany was firmly opposed to eurobonds, Chancellor Angela Merkel is open to discussion and could support the initiative on the condition that it is well-structured, the analyst said, adding that The Netherlands will be more complicated to convince.

The eurogroup meeting will be mostly devoted to technical aspects of coronabonds and should not conduct to any final decision, he said; EU leaders, who are due to meet on 26 March, will have the final word.

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