Europe is at the centre of the global pandemic but solidarity among European governments has been strikingly absent. Political fault-lines have reopened and it’s now feared that tensions over the cost of the looming economic depression could feed nationalism and far-right populism. Despairing Italian and Spanish leaders have warned that the EU itself is at risk of falling apart. We asked experts how governments might still come together to reconstruct a hopeful post-lockdown future for Europe and beyond.
Charles Grant: The shock will be uneven – this requires a fiscal union
Coronavirus has given hope to those who wish to see the EU stumble. Countries have put their own needs first and trust among governments has diminished. A long-running north-south rift over the future of the eurozone risks widening into a deadly chasm.
The economic depression will hit government revenues and lead to soaring public debt and unemployment. But the virus’s impact will be uneven: some EU states start with loads of debt and rely on industries such as tourism that will be severely affected, notwithstanding the compromise that EU ministers signed up to on April 9.
Several southern countries, and especially Italy, face grim prospects. Italians feel that after the eurozone and migration crises the EU is once again abandoning them. Their economy has scarcely grown since the birth of the euro and public debt is 135% of GDP. The populist Matteo Salvini now questions EU membership and is well-placed to win the next election.
The European commission has struggled to give strong leadership, but most of the key levers on health, borders and the economy remain in national capitals.
The European Central Bank has come up with an impressive €750bn bond-buying programme. But ECB action will not suffice. The EU needs to take on a role in fiscal policy. France, Spain and Italy want the EU to issue bonds guaranteed by the member states. The biggest share of the money would go to the neediest countries, to subsidise spending on health, corporate grants, unemployment pay and investment.
Eurobonds would mean the better-off EU countries helping to limit dire outcomes in southern Europe. The Germans, Dutch and other northerners oppose, fearing this would discourage weaker countries from undertaking painful reforms. They have a point, but the alternative – eurozone members sinking into a negative spiral of falling GDP and rising debt, and perhaps exiting the EU – would be worse for all concerned.
If the EU cannot respond to Covid-19 by moving towards fiscal union it will lose credibility in many member states.
Charles Grant is director of the Centre for European Reform, an independent thinktank
Shada Islam: Europe could limit the global damage
The way Europe acts today will determine everyone’s post-pandemic future.
So far, it is not Europe’s finest hour. We see authoritarian creep in Hungary and elsewhere. As solidarity becomes a hollow mantra, the EU brand is tarnished.
It doesn’t have to be that way. With US leadership missing in action, the EU could step boldly into the breach in three important ways.
First, the shock is global. Piecemeal national or even regional responses won’t be enough. European leaders must do what wise leaders did at the end of the second world war: organise another Bretton Woods moment to build an inclusive system of global economic governance. Western countries no longer call the shots in the real world.
Second: build a global partnership on health to give the World Health Organization the powers to monitor government health policies and ensure better global exchange of information on health emergencies and pandemics.
Third: Europe should push for a global humanitarian rescue plan to help countries in South Asia and sub-Saharan Africa that lack national capacity, money or medical personnel.
Debt must be erased and traditional aid policies overhauled. Providing “free money” or basic income for those in poor countries – as well as in rich ones – will need to be considered. The world will not bounce back to business as usual.
Shada Islam is director of Europe and geopolitics at the Friends of Europe thinktank
Bas Eickhout: Shun austerity and turn the recovery into a green new deal
If Europe can find the right instruments in the short and medium term, this crisis can be turned to good.
Coordinated lockdown exit strategies and medical supplies are the immediate needs. Then, two challenges: how to construct joint economic instruments to address liquidity needs and how to construct a long-term recovery.
Risk-sharing to address the financial burden is essential. In the longer term, Europe will need a credible recovery plan. But we need to learn from the past: the EU’s obsession with austerity unnecessarily deepened the eurozone crisis and led to massive unemployment. This time, Europe needs to go for a serious investment programme. And it must be used to address the climate crisis and biodiversity.
Europe’s pandemic recovery needs to be Europe’s green new deal, creating quality jobs in a climate-neutral economy and leading the way to zero pollution.
Bas Eickhout is a Dutch Green MEP
Brigid Laffan: This is a psychological crisis but it doesn’t have to be existential for Europe
Public health is a matter for national governments, not the EU – yet much of the coverage of Europe’s response is framed as “existential”, a test of its survival. But the EU does not command the resources or loyalties that can be called on by nation states.
It is now trying to harness Europe’s collective capacity. Eurozone finance ministers have put in place three instruments to support workers, companies and eurozone member states. France and Germany were pivotal in averting a damaging breakdown but European leaders will now have to follow up with a “corona fund” to rebuild health systems and address the longer term economic fallout. This pandemic demands the largest deployment of public finance and public power in peacetime Europe.
The absence of reliable comparable data on the spread and mortality rates across Europe remains a major problem. The EU also needs to prepare for future pandemics by stockpiling vital equipment and ensuring that it is not dependent on far-flung supply chains.
Covid-19 is a psychological crisis for individuals, communities and whole countries. The hardest-hit countries need to experience solidarity and know that the cost of recovery will not fall only on them alone.
Brigid Laffan is director of the European University Institute in Florence
Vessela Tcherneva: A new Marshall Plan and support for eastern Europe’s brain-drain
The coronavirus crisis has amplified the gap between east and west. Central and eastern European governments panicked knowing that their health systems, under-funded and stuck in the 90s, simply could not cope, hence their extremely strict lockdown measures. The crisis is also laying bare the effect of the brain drain from east to west. The EU cannot continue to neglect this problem. If Germany’s success in handling the pandemic is partly down to an army of migrant doctors and nurses, it should not be to the detriment of central and eastern Europe.
Free movement of labour has also, paradoxically, led to the return home of millions of eastern Europeans. About 200,000 Bulgarians who lost jobs in western Europe have returned home since the beginning of March. Of a working population of 3 million, that is a significant proportion (imagine 5 million Germans suddenly appearing on the labour market or applying for unemployment benefit). Apart from the suspicion that they are importing the disease, the returnees may become a longer-term preoccupation – and the EU may want to think about common labour insurance system.
A new Marshall Plan to rebuild post-pandemic Europe could help its economy to bounce back. And we may find that the populist wave has reached its limits and Orbán-style power grabs are short-lived.
Vessela Tcherneva is the deputy director of the European Council for Foreign Relations, based in Sofia, Bulgaria
Rosa Balfour: Democracy is under threat. A complete shift in thinking is needed
Last week’s agreement to make 500 billion euros available for recovery is a step forward but far from enough to allow Europe to use this tragedy to prepare for the future: a green and digital economy for the next generations. They will, in any case, have to pay for the costs of this pandemic.
This requires a complete shift in thinking about public investment, where the lessons of postwar Keynesian reform are more relevant than the more recent neoliberal decades.
It’s not just the economy. Democracy is increasingly under threat. The EU is doomed if it counts authoritarian states among its members. If the populist vision of the EU as a loose union of nations with minimal political integration prevails, it would mark the beginning of a loss of relevance to Europeans and the world.
The risk of a more inward-looking Europe is high now. But, should the pandemic spread across other regions, there will be demands for western support. If Europe fails to take responsibility, the loss will be felt around the world.
Rosa Balfour is the director of Carnegie Europe