Europe under political strain as bloc mulls collective response to coronavirus

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Andrey Kuzmin/Adobe Stack

There has been a lot of talk at the European level about collective action in response to the economic impact of the coronavirus outbreak.

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To date, there has been precious little concrete action.

Unlike the U.S. and the U.K., where sovereign governments can make decisions, a collective policy in Europe requires just that – collective decision making and agreement.

Over the decades, Europe has been quite good at reaching mutually acceptable decisions, even in circumstances with considerably divergent views.

If all else fails, the will of the largest, fiscally prudent north European and Scandinavian members tends to prevail. But often before that, a fudged compromise has proved sufficient to gain mutual agreement.

The process nearly always takes time. In the face of this unprecedented pandemic and the economic consequences of tackling it, time is not a luxury the E.U. has in abundance.

Collective action, in this case, has two priorities.

The first is short term, largely medical help. For that, there has been some resolute action, despite complaints in countries worse hit, like Italy and Spain.

The Financial Times reports that last week in the Netherlands, the government proposed a solidarity fund worth €20 billion, with cash transfers set to go straight to the coffers of Rome and Madrid to fund emergency medical spending. Despite what many media sources are saying, the E.U.’s assistance in terms of equipment and supplies for Italy, Spain and other hard-hit countries is vastly more substantial than that from China and Russia — but the latter have won the media war on this and claimed the headlines.

The perception in hard-pressed southern states is that fiscally prudent northern states are unwilling to cooperate in creating sufficient economic support, and that perception is causing deep and potentially long-term damage to the fabric of a European collective ideal.

The focus has been on northern states’ rejection of southern states’ proposed “coronavirus bonds” raised largely to fund post-lockdown spending and regeneration. The north ideologically objects to the mutualization of debt, worrying that they will be called upon to fund all manner of spending by their less fiscally prudent neighbors.

The plan proposed by France, Italy and Spain goes beyond what was already proving contentious under existing support mechanisms evolved since the 2008 financial collapse and subsequent Greek debt crisis, namely the European Stability Mechanism (ESM), access to funds via the European Investment Bank and the European Commission’s new unemployment scheme. Support via those institutions is suggested to be in the region of about half a trillion Euros, if it can be agreed this week by finance ministers.

The ESM, in particular, was proving unpopular in Italy because of stringent conditions such as fiscal targets and economic reform programs northern states enforced on Greece to qualify for similar assistance. If Italy were asked to meet such rules, it would be seen as a subjugation of sovereignty, not to mention a humiliation.

Emotions are running high in Rome.

Politicians have said they see the Dutch position as “an example of a lack of ethics and solidarity,” calling the country a tax haven and comparing German reluctance to support joint European debt with the partial cancellation of Nazi war debts by European countries, including Italy, after the second world war. “Germany could never have paid it,” a number of left-wing mayors and governors wrote in an open letter to a German newspaper, “Your place is with the Europe of institutions, of values of freedom and solidarity. Not following small national egoisms.”

France and its southern neighbors are calling for solidarity, mutual support and selfless collective action by all members of the European Union.

Northern states fear such an open-ended financial commitment will be the thin end of a very large wedge prising opening their wallets and committing them to open-ended debts the south will never repay.

If a compromise is not found, the danger is the very foundations of Europe’s collective spirit could be shaken. Many in Italy are already questioning what the point of the E.U. is if countries are not willing to pool resources and stand by each other in times of need. Nationalistic sentiment is running high and bad feeling is swelling by the day.

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Speculation of dire consequences for the future of the E.U. is premature, but finding mutual support mechanisms is certainly proving almost as testing for politicians as fighting the virus itself.

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