In the middle of a global pandemic, the European Union is losing a great opportunity for showing cohesion against a common enemy
During the coronavirus outbreak, which is dramatic in many respects, Europe is proving once again to be inexorably divided.
The line that bisects the Union runs along the economic front, as different perspectives are emerging about how to manage coronavirus-inflated budgets without fostering disparities between a wealthy north and a needy south.
The keyword that is taking up all the front pages of newspapers is one: coronabond. This term, coined from the more traditional Eurobond, stands for a solidarity mechanism — in the form of government securities — that would help countries to share their debts, thus raising the spending limits in vital sectors such as healthcare and citizens’ economic support. A life-saving measure for countries whose public debt is already over 100% of their GDPs — side note: with debt close to 140%, Italy is one of them.
With an increasingly growing number of infirm people, and intensive care units working round the clock at their maximum capacity, the prime ministers of Italy, Spain, France, Portugal, Slovenia, Greece, Ireland, Belgium, and Luxembourg — most of which are considered to be “southern European” nations — wrote a joint letter to Charles Michel, the president of the European Council.
They asked to implement tools aimed at “ensuring stable long-term financing for the policies required to counter the damages caused by this pandemic.”
This demand was echoed in an open letter signed by twelve Italian politicians (mayors, governors, party leaders) published on the German newspaper Allemagne Zeitung and reprinted by Italy’s Corriere della Sera.
“Today, the first challenge is about the existence of the European Union itself. The bloc does not have the tools needed to react to this crisis in a unified way. If it does not demonstrate its worth, the EU will stop existing,” they claimed, calling for a “European rescue plan” on the health, social and economic levels, managed by European institutions.
The warning call coming from southern Europe is crystal clear: existing financial measures are not enough in front of a global health crisis such as the one we are experiencing, and states require stronger tools in order to cope with the emergency. Now.
At the same time, a prominent group of nations led by Germany and the Netherlands stands in direct opposition to coronabonds or, basically, any kind of new economic measure that will somehow put at risk their budgets to help neighboring countries.
During a videoconference with EU ministers on March 26, the Dutch Finance Minister Wopke Hoekstra urged European institutions to investigate why some member states are lacking the financial buffers to make it through the crisis.
The move has been perceived as a clear attack toward the weakest economies of the Eurozone, which the Portuguese Premier Antonio Costa defined “repulsive”.
German Chancellor Angela Merkel also made clear that, regarding the possibility of issuing special Eurobonds to face the crisis, “this is not the opinion of all states in Europe.”
The fear is that the weakest countries could take advantage of shared responsibilities over their public debt to spend more than what they could normally afford. In a few words, northern-European states have no intention of jeopardizing their finances to save others, and they made the point about a possible alternative to the coronabonds: the dreaded ESM, the European Stability Mechanism.
For their part, Europe’s southern countries, with Italy and Spain on the frontline, fear that the ESM would imply severe austerity conditions, and are not enthusiastic about the idea of having their financial statements checked but euro-bureaucrats.
European institutions find themselves squeezed between northern and southern member states’ requests, and they have the difficult job of reconciling opposing interests in the middle of a major health crisis.
“Europe needs to show whether it can live up to this call of history,” said Italian Prime Minister Giuseppe Conte. A plain-spoken response to Ursula von der Leyen and Christine Lagarde’s ambiguous attitude towards the economic management of COVID-19.
“The term ‘coronabond’ is a mere slogan, we are not working on this,” the European Commission’s president claimed on March 28. A few days earlier, the European Central Bank’s chief Christine Lagarde adopted a more proactive approach and opened up to the possibility of issuing one-off coronabods.
On March 30, Europe had more than 359,000 cases of coronavirus, and time proved that no country is immune. Viruses know no boundaries and the whole world is facing the same problem — but apparently with different levels of stress based on how much public debt national governments can afford to accumulate.
The European Union is losing a great opportunity for showing, once and for all, a uniform cohesion and a strong will to reach solutions that do not accentuate the already existing differences between its members.
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