Finance ministers agreed on details of ESM crisis support tool

The money can be used only for direct and indirect health care costs

Finance ministers of the euro area agreed on Friday at a videoconference on all the features and details of the Pandemic crisis support tool, the ESM-based backstop for sovereigns. It is part of the €540bn package of three safety nets for workers, businesses and member states, approved by EU leaders in April. 

Eurogroup ministers confirmed as well that all ESM members meet the eligibility criteria to access this safety net. The size of the instrument would be 2% of individual member state GDP, as a benchmark.

Member states requesting support will commit to use this instrument to support domestic financing of direct and indirect healthcare, cure and prevention related costs due to the Covid-19. “There are no other requirements attached to the use of the facility,” Eurogroup President Mário Centeno said during the virtual press conference following the meeting.

He explained that this commitment will be detailed in a “Pandemic Response Plan” prepared on the basis of a common template that they have also agreed upon on Friday.

After accelerated procedures to grant Pandemic Response Support, the facility will be available, on a precautionary basis, for the member state concerned for a period of 12 months, which can be extended twice, by six months. Disbursements would then be available on request.

Reflecting the exceptional nature of the crisis, we have agreed on favourable and adequate financial terms: these loans will have an average maturity of 10 years and will carry a low financing cost, Eurogroup President specified.

We are implementing our agreement on three safety nets, for workers, for businesses, and for sovereigns, Mário Centeno said recalling that EU leaders have endorsed their plan and set a target date of 1 June to make them operational. “We are getting there on time”, he stressed.

During the press conference Paolo Gentiloni, EU Commissioner for the Economy, made it clear that to request access, Member States will have to present an estimation of their direct and indirect healthcare, cure and prevention costs linked to the Covid-19 crisis. When a Member State draws funds from this credit line, the so-called ‘enhanced surveillance' that the Commission will carry out will focus only on monitoring the use of the funds and their coherence with the scope, he said adding that there will be no additional missions carried out. “ In short, one condition, and streamlined monitoring related solely to that condition.”

ESM Managing Director Klaus Regling underlined that money from the Pandemic Crisis Support “will be made available at very low cost, “only marginally above zero”. He emphasized that Member States that decide to draw from the credit line will commit to use the money for direct and indirect health care costs and there is no other condition attached to this facility and each country can benefit from the support in the volume of two percent of its GDP. If all member states were to draw from this facility, which I do not expect, of course, but if all were to do it, this would add up to €240bn, he said.

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