ESM says its pandemic support attractive to 11 countries
A senior executive at the eurozone's bailout fund made a plea to member countries to use its new pandemic crisis support credit line in a blog published on Wednesday.
In a post entitled "out of the box, a new ESM for a new crisis," European Stability Mechanism chief financial officer Kalin Anev Janse said that looking at the all-in costs of the fund, it "would be attractive for 11 member states."
Of the 11 states named, Greece, Italy and Cyprus would stand to benefit the most. For instance, the yield on Greece's 10-year bond is 1.52% according to Tradeweb, while the equivalent ESM yield would be just 0.08%, all-in.
One of the most persuasive points made is the savings that participation could offer. "In real life, under current market conditions, for some countries the cost savings could be up to €6 billion for 10 years. This is a real cash saving for taxpayers," wrote Janse.
There would also be other benefits, with arguably the most important being that the pandemic credit line would relieve pressure on domestic bond yields. "In other words, several billion euros in some cases would not need to be financed in the market but could be financed via the ESM."
Despite this there is an apparent reluctance among some of the countries that would stand to benefit from participating, perhaps due to the negative signalling effect that may ensue.
Last week the Cyprus finance ministry said in a statement to Reuters that "it should be noted that as currently things stand in the area of public finances, we do not foresee a utilisation of the ESM's credit line."
Others have also sounded less than enthused, with Reuters recently reporting that Spain was planning to avoid using cheap European Union bailout funds in all but a worst-case scenario in its fight against the coronavirus pandemic.
The blog also announced that it was working towards designing social bonds after mentioning them on a call last month. "ESM strives to make use of Social Bonds as an innovative debt instrument, in order to allow investors focusing on environmental, social and governance (ESG) issues to allocate their funds to the ESM Members hit by the pandemic crisis."