EU finance ministers reached an agreement on Thursday evening on the bloc's response to the economic crisis caused by the Covid-19 pandemic.

The agreement, agreed by finance ministers of the 19 euro zone countries and 8 EU countries which had not yet adopted the euro, includes a set of long-term and short-term stimulus measures.

The short-term measures include loans from the European Stabilisation Mechanism (ESM), a European Investment Bank guarantee fund, and a programme for pan-European support for short-time work arrangements (SURE).

The biggest obstacle to an agreement on the ESM credit line were completely opposed views of Italy and the Netherlands, with Italy asking that loans be granted without any conditions and the Netherlands insisting on conditions.

It was agreed that the ESM can be used without conditions for the financing of health sector costs caused by the pandemic. Further use of the credit line will be conditional on compliance with economic and fiscal principles defined by the EU’s fiscal framework.

As for a recovery fund, which is a long-term measure, it was agreed that it was necessary, but no details were specified. Such a fund would be temporary, targeted, and proportionate to the extraordinary costs of the current crisis, according to the report.

The report does not mention the issue of debt collectivisation, eurobonds of coronabonds, but it does mention the term ‘innovative financial instruments’.

The ESM has €410 billion available for funding, and the loans for member countries may amount to a maximum of 2 percent of their GDP. This means that the loans could total a maximum of €240 billion, which is equal to 2 percent of the euro zone’s GDP.

Finance ministers also supported the EIB’s initiative for the establishment of a guarantee fund worth €25 billion, which would be backed by member countries and would provide loans to a maximum of €200 million each. The money would mostly be intended to subsidise small and medium-sized businesses.

They also supported the European Commission’s proposal for a €100 billion programme to support short-term work arrangements, for which member countries will provide guarantees, and which should help companies in countries worst hit by the epidemic to retain workers.