Why Germany is reluctant to bail out Italy

The European Union has done it again. Last Thursday, member states agreed on an aid package of more than half a trillion euros (£436bn). A good portion of that money will be used to revitalise the economies in Italy and Spain, the two European countries that have suffered the most deaths due to the virus so far. But the recovery fund was only made possible because the agreement avoided an explicit mention of jointly-issued debt, which has been anathema to Germany, Finland or the Netherlands. ‘It is impossible that debt could be communitised’, Angela Merkel said after the package was announced. The German chancellor and other state leaders oppose ‘coronabonds’, arguing that such a concept would punish those countries, like Germany, that have built up reserves during good times.

But that view isn’t universal among European leaders. ‘If Europe does not rise to this unprecedented challenge, the whole European structure loses its raison d’être for the people,’ said Italian prime minister Giuseppe Conte in March.