Eurogroup chief warns of euro breakup amid EU feuding

Eurogroup president Mario Centeno warned the euro single currency could break apart if feuding governments don't bury the hatchet and agree on a rescue plan to help Italy and Spain. The carefully worded warning came as the 19 members of the single currency still cannot agree on a rescue plan to reverse the devastating impact of the coronavirus pandemic on the European economy.

Italy and Spain are so far the continent's worst hit and are also among the eurozone's most indebted countries. On their own, they simply lack the fiscal firepower to restart their economies. Centeno's plea for unity harked back to the worst days of the eurozone debt crisis when divisions between the eurozone's richer and poorer members almost sank the currency.

In a letter sent on Monday to European finance ministers and seen by AFP, Centeno said national budgets in Europe faced a "colossal shock" commensurate with the coronavirus outbreak itself. "Inevitably, we will all come out of the crisis with much larger debt levels," added Centeno, who is also Portuguese finance minister.

"But this effect and its lasting consequences should not become a source of fragmentation," he said. Following an ill-tempered EU leaders summit on Thursday, the ministers were tasked by the 27 EU heads of state and government to find a response to the crisis.

They will meet by videoconference on April 7 and Centeno said they had until Easter, on April 12, to agree on a way forward. Italy, Spain and seven other countries have come out in support of something called "coronabonds", a pooled borrowing instrument for all the eurozone's 19 members.

The coronabond would help shield the most economically fragile countries from over-indebting themselves and remove the stigma of seeming to need cash urgently that would spook the markets. Germany leads a group of northern nations that outright refuses any talk of common debt in the eurozone, arguing it rewards countries that have proved unwilling to push through adequate reforms and budget belt tightening.

They want the crisis response to be handled by the European Stability Mechanism, the eurozone's 400-billion-euro bailout war chest. Reassuringly for Berlin, ESM rescues come with reform conditions attached, but last week's leaders summit failed to find a solution when Madrid and Rome refused to go down this road.

Given the sensitivities and frayed nerves, Centeno addressed the ministers in careful language, although he insisted that all options were still on the table. "We need to explore ways to implement existing instruments but we must be open to looking at alternatives when the first ones prove inadequate," he added.

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