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The Viktualienmarkt food market sits relatively empty in Munich on March 20, 2020.

LAETITIA VANCON/The New York Times News Service

Euro zone finance ministers hope to agree on Tuesday on half a trillion euros worth of economic aid to finance recovery from the coronavirus, a discussion that has sown divisions as the bloc struggles with the outbreak.

If they do agree, the joint EU and national government responses could add up to the biggest fiscal support program in the world, surpassing that of the United States, Reuters calculations showed.

But there is no deal is in sight on issuing joint debt, something hardest-hit Spain and Italy have demanded but were denied by the more fiscally conservative Germany and the Netherlands.

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The ministers will agree on three economic safety nets – for workers, for businesses and for governments, the chairman of the ministers Mario Centeno said in a video statement.

“It is arguably the most sizable and ambitious package ever prepared by the Eurogroup. It builds on unprecedented efforts already take by governments and monetary authorities,” he said.

“The economic plan will shield our economic and social tissue as we dive into a recession,” he said.

The fight about how far to go to cushion the downturn has left the ailing south chastising its wealthier peers for not showing enough solidarity and casting it as an existential test that could break the EU.

“It is the same as during the great crisis in the euro,” Josep Borrell, the EU’s top diplomat, told el Mundo on Tuesday. “We must continue to look for more solidarity.”

But the Netherlands, Germany and several others are against mutualizing debt. They say that all euro zone countries can still cheaply borrow on the market and EU limits on deficits have been lifted for the pandemic, so there is no need to create eurobonds now – especially since that would take years.

“Eurobonds, I wouldn’t do that, and the cabinet also wouldn’t do that,” Dutch Finance Minister Wopke Hoekstra reiterated.

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The ministers meet via video conference from 1400 GMT on Tuesday to prepare a list of ideas for further economic aid that EU leaders might then endorse.

LIKELY LIST OF OPTIONS

The first is standby credit lines from the euro zone bailout fund of up to 2 per cent of a country’s gross domestic product, or 240 billion euros in total. That will come with minimal conditions focused on health issues to alleviate Italy’s concerns it would be told to reform its economy to get access to the money.

The second is granting the European Investment Bank 25 billion euros of extra guarantees so it can step up lending by 200 billion euros, on top of a 40 billion-euro increase in lending already under way.

The third is support for the EU executive’s plan to raise 100 billion euros on the market against 25 billion euros of guarantees from all governments in the bloc, to subsidize wages so that firms can cut working hours rather than sack people.

Finally, the ministers are likely to back a plan to create an emergency support fund issuing grants for medical supplies and health care, which could reach some 20 billion euros.

The ministers will also note a French proposal to create a joint EU solidarity fund to finance long-term recovery. Worth several hundred billion euros and financed by joint borrowing, it is, however, unlikely to get broad support as debt mutualization is a red line for the frugal camp.

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“On the joint liability of all governments, it is no surprise that there are different opinions on this,” one senior official involved in preparations for the meeting said. “There is a clear need for more work and discussions.”

Spain would like the EU to help finance the recovery by issuing bonds through the Commission, using the EU’s long-term budget, now under negotiation, as collateral. But, like the French idea, it is unlikely to get a separate mention but be bundled under the heading of a future strong recovery plan.

“I will call on ministers to make a clear commitment for a co-ordinated and sizable recovery plan,” Centeno said.

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