THE GIST of Editorial for UPSC Exams : 16 April 2020 (Corona bond : On Eurozone COVID-19 rescue package (The Hindu))

Corona bond : On Eurozone COVID-19 rescue package (The Hindu)

Mains Paper 2:International 
Prelims level: Corona Bond
Mains level: Requirement of corona bond for revival of eurozone 

Context:

• Deliberations on the €540-billion emergency rescue package that Eurozone Finance Ministers agreed to underscore the difficult road ahead to chart the economic recovery from the coronavirus crisis. 
• They also decided to open an emergency credit line in a fortnight, raise the lending capacity of the European Investment Bank and back the European Commission’s €100-billion unemployment insurance scheme. 

Expand its asset purchase programme:

• The European Central Bank in March decided to expand its asset purchase programme by €750-billion over the next nine months.It took to save the single currency. 
• But the current formula has stoked controversy, like during the economic meltdown, over burden-sharing between the richer members in the north and the poorer states in the south. 

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Opposed demands: 

• The Netherlands initially opposed demands from Italy.
• That because, the country worst affected by the virus outbreak, that the pandemic credit to be issued by the European Stability Mechanism be stripped of any conditionalities. 
• Rome’s reasoning that the public health emergency was universal and symmetrical may have influenced the final deal, which allows governments borrowing from the bailout fund to spend up to 2% of GDP on direct and indirect costs of the pandemic without strings attached. 

Issuance of the Corona Bond:

• France, Italy and Spain, the bloc’s three largest economies, with six other members in the euro area wrote in late March to the European Council President, renewing calls for joint issuance of Eurobonds, now dubbed corona bonds. 
• The idea of mutual issuance of debt has drawn only a lukewarm response from Berlin, Amsterdam and the bloc’s other members. 
• The cracks have appeared in the Netherlands’ ruling coalition over the government’s orthodox fiscal stance, where the opposition Labour and Green parties already advocate Eurobonds. 

Way forward: 

• With the Eurozone’s three largest economies after Germany throwing their weight behind the new financial instrument, it may not be long before the bloc’s fiscal hawks rethink their stance. 
• The economic and political consequences of failure on this count would hamper the post-pandemic recovery, and could affect European solidarity. 
• European leaders would do well to address this fact when they formulate an economic recovery after the crisis.

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Prelims Questions:

Q.1)With reference to the World health day 2020, consider the following statements:
1. The World Health Day is a global health awareness day celebrated every year on 8 April, under the sponsorship of the World Health Organization (WHO).
2. WHO chose the year 2020 as the "Year of the Nurse and Midwife" because of the contribution which nurses and midwives are making in making the world a healthier place.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above

Answer..................

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Mains Questions:
Q.1) What do you mean by the Corona Bond? Describe its role to protect the eurozone.