By Francesco Guarascio and Andreas Rinke
BRUSSELS (Reuters) - European Union leaders wrangled over how far to go on rolling out emergency aid for their economies hit by the coronavirus on Thursday, with Germany and the Netherlands opposing calls by Italy to issue joint debt.
The EU is struggling to present a united front on economic stimulus, the sharing of medical equipment and safeguarding of essential supplies now that borders have been tightened or closed to try to curb the spread of the pandemic.
Charles Michel, who as president of the European Council chairs EU summits, has called for a new "Marshall Plan" - named after the U.S. aid package that kick-started Western Europe's recovery after World War Two - to help revive the economy from a deep slump caused by the coronavirus.
Nine countries including France, Italy and Spain have called for mutualized debt.
"We need to work on a common debt instrument issued by a European institution to raise funds on the market," the nine leaders said before a 1500 GMT video call involving the leaders of the 27 EU member states.
But Germany, the Netherlands, Austria and Finland - the fiscally conservative "Frugals" - are opposed.
"Leaders will want to show unity. They will concentrate on areas where they can find consensus and not on divisive issues like eurobonds," said an EU diplomat from one of the reluctant countries.
'LOCH NESS MONSTER'
The bloc has already suspended state aid rules and limits on public borrowing to allow member states to spend freely to cushion the economic hit. The European Parliament is due on Thursday to approve 37 billion euros ($40.5 billion) worth of emergency funds and measures to help airlines.
The EU is also considering a credit line worth some 2% of economic output from the European Stability Mechanism bailout fund of the 19-member common-currency euro zone.
A draft joint statement prepared before the EU leaders' conference, which was seen by Reuters, would ask the bloc's finance ministers to work out details of the latter.
But, after several rounds of discussions, EU diplomats preparing the leaders' call were unable to agree on a text that would be acceptable to all capitals.
Berlin and its allies say all EU states can still finance themselves on the debt market and the European Central Bank has also announced emergency bond purchases to put 750 billion euros into circulation.
The ECB has also ditched a cap on how many bonds it can buy from any single euro zone country, which some EU states welcomed as lowering the pressure on governments to act.
"A real 'euro-bond' is the Loch Ness monster – it has never been seen and is not on the table now," said an EU official preparing the summit.
EU unity and solidarity had already been damaged by the 2008-12 euro zone crisis, the 2015-16 wave of immigration from the Middle East and Africa, and Britain's decision to leave the bloc.
EU leaders are due to agree to shield their strategic healthcare and infrastructure firms from foreign hostile takeovers.
But they will also spar over medical equipment shortages and emergency border curbs that have caused tailbacks in what normally is Europe's frontier-free travel zone, slowing deliveries of basic goods.
Europe marks the 25th anniversary of its open-border Schengen agreement on Thursday with its land borders shut or subject to heavy checks.
Italy, the EU country hit the hardest by the coronavirus, has managed to secure protective equipment - but did so from China and Russia.