Ben Tonra: As it was in 2008, the EU drama on who pays for the Covid-19 crisis has a way to run

What are we to think of the EU’s response to the Covid-19 pandemic: A ‘make or break’ moment or business as usual?
Ben Tonra: As it was in 2008, the EU drama on who pays for the Covid-19 crisis has a way to run
European Commission President Ursula von der Leyen: vocal on member states' Covid-19 response

What are we to think of the EU’s response to the Covid-19 pandemic: A ‘make or break’ moment or business as usual?

The early signs weren’t positive as European governments and EU institutions awoke to the scale of the crisis.

As late as mid-February it was clear that the EU had no data on member states’ preparedness for the pandemic — largely because the states themselves had no information.

The EU had no strategic stockpiles of medical equipment as this was the responsibility of member states.

As the deaths multiplied into March, governments scrambled to respond with uncoordinated and unilateral moves to cancel flights, close borders and limit or ban movement outside the home.

Strategies varied wildly — with some states imposing draconian lock down measures at an early stage, while others insisted that social distancing was enough.

Schools were closed on one side of a border but remained open on the other.

At one critical point some member states actually banned the export of medical equipment inside the EU and tried to seize supplies from foreign-owned firms.

In the most well-known example, Italy activated an EU emergency civil protection mechanism to get medical supplies, but no EU government replied.

On March 26, EU Commission President Ursula von der Leyen condemned member states for their short-sighted responses.

As the overwhelming scale of the human crisis became evident first in Italy and then in Spain, most governments effectively closed their economies to slow the spread of the disease.

Economic rules were suspended as EU limits on government budget debt were cast aside, public subsidies to private industry were approved and welfare spending exploded to deal with mass unemployment.

The structure of the European economy was turned upside-down, in days.

While the formula for addressing the health crisis soon became clear, dealing with the economic crisis was tougher, especially as the wounds from the 2008 financial crash were quick to re-open.

Money is the best weapon to deal with the crisis — to reinforce healthcare systems, to support citizens that have lost their livelihoods, to protect jobs, and, hopefully, to restart the economy when the pandemic is under control.

But where is the money to come from?

Here, Europe is confused.

For some, prudence dictates that national governments should dig deep into their own pockets and, where necessary, assist others if they are not able to help themselves.

For some, aid must come with conditions to ensure that funds are wisely spent.

For others, this is a recipe for the same kind of punitive austerity that was imposed after 2008 — punishing victims for the crisis.

It’s these attitudes that frame arguments among EU ministers about rescuing the European economy.

The EU’s own budget of €160bn is only just bigger than that of Finland, so the union itself can’t refloat the European economy.

Individually, member states can of course borrow but they face the limits of the money markets who will charge over the odds those (like Italy) whose economies are already overextended and suffering disproportionately from the crisis.

The solution — so it is argued — is that the union (or at least the members of the eurozone) should borrow together and share the burden.

At last week’s summit of finance ministers the teams lined out again: The frugal northerners (Austria, Finland, Germany and the Netherlands) faced off against the “friends of cohesion” (France, Italy, Spain, Portugal).

Hollow

In the eye of the storm, however, some of the old arguments rang hollow.

When, for example, the Dutch finance minister had earlier suggested that the EU should “investigate” why Spain and others weren’t able to meet the financial challenge of the pandemic, the Portuguese prime minister came out swinging.

The Dutch statement was, he said, “absolutely thoughtless” and exemplified a “recurrent pettiness” that “completely undermines... the spirit of the EU and is a threat to the EU’s future”.

The Italians poured on the pressure, insisting that unless the EU agreed to share the burden of the crisis and its recovery, the union would have failed.

On Friday, the latest — and certainly not the last — scene of this drama closed to applause.

The French and German governments — working with the Portuguese — secured agreement to a preliminary no-strings-attached €500bn of EU assistance through the eurozone’s European Stability Mechanism, the European Investment Bank and the European Commission.

They also proposed a “temporary, targeted” multi-billion EU Recovery Fund to help restart the European economy but, significantly, they didn’t agree on how that money would be borrowed.

Watch this space.

The European drama continues.

Ben Tonra is professor of international relations at University College Dublin.

More in this section

IE_logo_newsletters

Select your favourite newsletters and get the best of Irish Examiner delivered to your inbox

LOTTO RESULTS

Wednesday, December 8, 2021

  • 3
  • 15
  • 19
  • 23
  • 31
  • 39
  • 5

Full Lotto draw results »