By Laurence Norman 

BRUSSELS -- European finance ministers worked through deep differences to agree to a package of measures totaling half a trillion euros aimed at blunting the impact of the coronavirus on the fragile economy, officials said. But a bigger conflict over whether to share the costs of the health crisis was deferred.

The agreement late Thursday provided a moment of unity in what has been a bruising fight among European Union members over the response to the crisis, which has slammed some countries still recovering from the financial crisis a decade ago. Finance ministers had spent more than 15 hours Tuesday night trying to reach an accord without success.

"This response contains bold and ambitious proposals that would have been unthinkable just a few weeks ago. We can all remember the response to the financial crisis of the last decade when Europe did too little, too late," said Mario Centeno, president of the Eurogroup of finance ministers. "This time around, it is different."

The deal, however, provided only a temporary truce among hard-hit members, including Italy and Spain, and wealthier northern countries, like Germany and the Netherlands, over whether the 19 members of the common currency bloc should issue common eurozone debt to finance recovery efforts from the crisis.

Over coming months, the steps agreed to should offer businesses additional liquidity, help governments fund job programs and provide credit lines, with relatively few strings attached, to European governments that face difficulties accessing financial markets, according to a final text of the deal.

But southern countries say immediate guarantees of common debt issuance are crucial to allow them to spend what they need to handle the coronavirus crisis. Without that promise, governments in the hardest hit countries may constrain stimulus now to avoid high debt level spiraling further and sparking a sovereign debt crisis as the bloc looks toward an economic recovery.

EU leaders had given finance ministers two weeks to come up with measures, a deadline that ended Thursday. They are expected to hold a teleconference next week to sign off the recommendations.

Under the deal, member states will be able to receive precautionary credit lines from the region's bailout fund amounting to at least 2% of a country's economic output, or some EUR240 billion ($262 billion) of the available credit in the region's bailout fund, known as the European Stability Mechanism.

Finance ministers said they would try and set up access to the ESM within two weeks. The funding could help pay health costs directly related to the crisis. Non-euro EU countries will have access to the EU's balance of payments financial assistance.

While there are few initial conditions on the use of the money, over time countries would "remain committed to strengthen economic and financial fundamentals," the text of the deal said, a demand of the Netherlands in particular.

Borrowing from the ESM has become a no-go in Italy, because of heavy conditions attached to the fund's money under the financial crisis. Opposition leader Matteo Salvini has spearheaded a campaign against Italy signing up to the fund.

The finance ministers also backed a program extending up to EUR200 billion in loans to EU businesses, underwritten by EUR25 billion in member state guarantees for the European Investment Bank, the bloc's finance arm.

They gave the go-ahead for a EUR100 billion jobs support program proposed last week by the European Commission. Once set up, that will see the EU's executive body borrow directly in the markets, with guarantees provided by member states, to help governments fund programs that prevent companies laying off workers.

The ministers also committed to establishing a large-scale recovery fund to help the region emerge from the crisis. However, they left key questions open about the size, timing and financing of the fund for the bloc's leaders to come back to.

The text said the fund would need to be temporary and targeted, and didn't mention eurozone bonds, reflecting the division within the bloc over the instruments. It said only that discussions on financing the fund would include "innovative financial instruments, consistent with EU Treaties."

The Netherlands, Germany, Finland and others have long opposed Eurobonds, saying they would turn the eurozone into a financial transfer union and are inconsistent with EU and domestic laws.

"With this package we will help countries in need on the short term while also building resilient economies on the long-term," said Dutch Finance Minister Wopke Hoekstra. "This is a powerful and sensible sign of European solidarity."

Carsten Brzeski, Chief Economist, Eurozone and Global Head of Macro at ING, said that given the disagreements, he doubts the recovery fund will "fly any time soon."

"This aid package...leaves the question whether any of the countries will be satisfied," he said. "As so often in eurozone decision making, small historic steps have been taken toward more integration, but many would argue this isn't yet enough."

Write to Laurence Norman at laurence.norman@wsj.com

(END) Dow Jones Newswires

April 09, 2020 18:43 ET (22:43 GMT)

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