By Christopher Tan (PZ ‘21)
In Milan, hospitals have been overwhelmed by a deluge of patients. In Madrid, authorities turned a historic ice-rink into a morgue for the dead. In Paris, officials scramble to find more ventilators for rising numbers of critical cases. With lightning speed, the spread of COVID-19 has devastated European health services and paralyzed continental trade. As borders close and emergency measures are enacted, the European Union’s experiment in shared sovereignty, monetary policy, and free movement is facing a systematic shock like no other. This has raised questions about its long term prospects.
The E.U. has shown admirable resilience in weathering shocks that have threatened its durability. During the 2009 eurozone crisis, where several member states were on the brink of defaulting on their debt, many predicted that the E.U. would collapse. Greece was forced to adhere to austerity measures imposed by Brussels as a condition for financial support even though Greeks explicitly rejected the policies in a referendum. While E.U. membership binds governments to certain rules and regulations instituted by E.U. institutions, this ‘pooling of sovereignty’ as this is generally referred, scrubs away at states’ ability to act independently. Even though Greek voters had rejected the austerity measures imposed by Brussels, Athens had no choice but to accept them if they wanted to receive the bailout and avoid further penalties. It comes as no surprise that resentment against Brussels continues to fuel politics in Greece to this day. Similarly, during the 2015 refugee crisis, E.U. states on the continent’s periphery, like Italy, grumbled about Brussels’ lack of support as they handled disproportionate numbers of asylum seekers. Inevitably, in the wake of these crises many have questioned the E.U.’s viability as a body meant to facilitate cooperation and solidarity. Through measured diplomacy, bold fiscal stimulus, and sensible cooperation, Brussels withstood these shocks. The European experiment endured.
COVID-19 presents the E.U. with formidable policy challenges that may be its downfall. The problem lies with the E.U.’s architecture, with the bloc lacking a central enforcement mechanism. This has come at the cost of effective crisis management. While E.U. law technically obliges states to adhere to E.U. law in the event of any conflict between E.U. law and national member state laws, many national courts have still reserved the right to interpret E.U. law under their own constitution. As such, the E.U. remains averse to superseding the authority of internal governments, with most of its regulations mainly pertaining to issues of trade, privacy and finance.
While this has succeeded as a means of keeping the peace in times of prosperity, the lack of a mechanism able to encroach on states is doubly problematic for responding to COVID-19. First, it means the supranational institutions cannot support states by building hospitals, producing medical supplies, or providing support for struggling businesses and workers. Second, E.U. members cannot enact binding policies across its members that could more decisively combat COVID-19.
Furthermore, with states inclined to act for their own self-interests in times of crisis, coordination and collective decision making falls apart. Italy’s plight in the last month demonstrates this discordance. Faced with a ballooning number of serious cases and deaths amidst dwindling medical supplies, Rome pleaded with E.U. members for support. Facing supply shortages of their own, no E.U. member responded. Germany, the richest and largest member of the E.U., banned the export of medical masks and other protective gear (this has since been retracted). Austria, Italy’s alpine neighbor, barred Italian citizens from entering its borders. Christine Lagarde, the president of the European Central Bank (ECB), suggested that it was no longer her job to keep Italy in the euro.
While other E.U. members are preoccupied with confronting the crisis on their own, the inability to provide support for a struggling member demonstrates the absence of a culture of solidarity within the bloc. To Italians, the narrative is even clearer: abandonment in their darkest hour.
“It is back to the future, where Italy is left on its own,” said Nathalie Tocci, director of the Institute for International Affairs in Rome, in an interview. “It was the case with the eurozone crisis, then the migrant crisis of 2015-16 and now the coronavirus crisis. The political implications could be massive.”
Similarly, vast disparities in economic conditions mean that some E.U. members have greater capacity to respond to the virus than others. While rich export-driven E.U. countries like Germany and the Netherlands have been able to cushion the virus’ effects by passing vast rescue packages for their economies, poorer and more hard-hit countries like Italy and Spain cannot afford to do the same. While the Italian government was able to pass through a rescue package for its struggling economy, it amounted to only 4% of the German package. Inequities in responses will only fuel resentment and drive divisions in the virus’ aftermath.
This begs the question, what is the point of E.U. solidarity if countries don’t share the burden of crises? Despite efforts from Brussels to foster greater cooperation, six E.U. countries kept export bans on medical equipment. France, facing expected shortages, nationalized its supplies. Twelve states have imposed internal borders, abandoning the E.U.’s principle of free movement of goods and people and blocking the transport of vital supplies in the midst of the pandemic. Given that the E.U. was founded in the interests of mutual cooperation, the lack of a joint response to the virus has exposed its flaws as a fragmented union.
There is hope. Nine heads of government, including the leaders of France, Italy, Spain, and Belgium have called for the issue of “a common debt instrument” or a long-term bond to help raise funds to fight and recover from the pandemic. Emmanuel Macron, the French president, told the Financial Times in an interview that the E.U. had “no choice” but to issue common debt across members. This has been envisioned before. In the aftermath of the eurozone crisis, the European Commission envisaged the creation of a new fund within the E.U. to speed up economic reforms and cultivate fiscal integration between countries. While progress on this has lagged, the effects of the coronavirus will spur countries to back similar reforms.
Complications remain, with the E.U. still split on how it ought to respond. Export-driven states of northern Europe like Germany and the Netherlands have opposed shared debt. While meetings amongst leaders continue, albeit through teleconference, no consensus has been reached on how Brussels will collectively respond to the pandemic. Solidarity lies on a razor edge.
If the E.U. is to survive beyond the crisis, Brussels must act quickly and decisively to bolster support for vulnerable members. On March 18, the ECB unexpectedly announced a massive €750 billion package in bond purchases to calm down ravaged sovereign debt markets, preventing a calamitous spike in borrowing costs on the continent.
“Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate,” said ECB President Christine Lagarde in a tweet.
These measures are merely a short term solution to a growing problem. In the coming months, a stronger joint response will be needed. The issuance of bulkier long term bonds and other securities with older maturities will better aid the fiscal response to the coming recession. Opening borders for vital supplies and the creation of an emergency mechanism to facilitate support for heavily affected areas would also help to provide much-needed support in the short term. With much of the continent still struggling to cope with the pandemic’s spread, these measures will need to be hastily implemented.
Given that countries like France, Spain, and Italy are laden with debt, more time and stimulus will be needed to institute reforms and bolster their recoveries. Banks may have to be bailed out, industries may have to be nationalized to prevent collapse and companies in hard-hit sectors like aviation and tourism will need additional fiscal support over the next year. This would mean that the financial burden will have to be shared. While the E.U. may not be able to support these areas directly, it can assist countries by creating a better institutional mechanism to do so. As such, a more federal E.U. must be considered. Failure to act could prove consequential for the sake of European solidarity.
If the E.U. is to succeed, then clear, decisive and unified action is needed to demonstrate that trust and solidarity resonate. Given that the road to this has been riddled with bureaucratic and nationalistic obstacles, reality suggests that discord and mistrust are more prevalent. This may prove to be the E.U.’s downfall. While Brussels won’t collapse any time soon, anti-E.U. narratives will be easier for populist politicians to trumpet if the E.U. fails to support more affected countries. This will only continue to play out with each coming election. The U.K. has already decided that it is better off out of the E.U.; expect calls for Italy, Greece or Spain to follow if this crisis deepens. After all, it is telling that when Italy finally received the emergency supplies it desperately needed, it came from China rather than any E.U. member.
