Europe after the plague

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President Trump, you’ve got company. The European Union also is on the hot seat for its tardy and ineffectual response to the coronavirus pandemic.

Come November, U.S. voters will have an opportunity to fire Trump for rank incompetence. But Americans should be rooting for the EU to raise its game. Otherwise, Europe could emerge from the COVID-19 crisis fatally weakened in every way — broke, politically fractured and unable to resume its role as America’s main partner in world affairs. 

Euro-skepticism was rising even before the crisis hit. Britain emphatically reaffirmed its decision to quit the EU last December. Across the continent, insurgent populist parties have been gaining ground on the strength of promises to curb migration, shelter workers from globalization and “restore” national sovereignty.

Against this backdrop of rising nationalism, the pandemic is putting the EU to a stern test of efficacy and relevance. As Europeans struggle to contain the plague and keep their economies from unraveling, can Brussels organize mutual aid that’s equal to the magnitude of the crisis? So far, the answers haven’t been encouraging.

Italy was the first EU country to be hit hard by the virus. As the pandemic ravaged northern Italy and economic life sputtered to a stop, its neighbors were excruciatingly slow to lend a hand. In early March, a frustrated Maurizio Massari, Italy’s ambassador to the EU, decried the breakdown of European solidarity:  

“Italy has already asked to activate the European Union Mechanism of Civil Protection for the supply of medical equipment for individual protection. But, unfortunately, not a single EU country responded to the Commission’s call. Only China responded bilaterally. Certainly, this is not a good sign of European solidarity.”

Stung by the criticism, Germany and some others duly sent medical supplies. Now, the EU is embroiled in an intense debate over how to help countries like Italy and Spain rescue their stricken economies. The uneven impact of the virus, and the economic shutdowns necessary to contain it, have illuminated the same north-south fissure that emerged during the 2008-9 financial crisis.

The European Central Bank has launched a massive bond buying plan to support bank lending. But southern countries, which suffer from lower growth rates and higher debts, also want the 19 eurozone countries to issue “coronabonds” that would allow national governments to borrow money cheaply to spend on fiscal stimulus. Northern states, led by Germany and the Netherlands, have rejected this call to “mutualize” or share the debt burden of financing recovery in other countries.

Instead, the EU has offered aid from the European Stability Mechanism, but southern countries object to financial assistance that comes with humiliating, Greek-style conditions on how they can spend the aid. 

The impasse has stirred outrage in Italy, Spain and, increasingly, France, which have gotten both the worst of the pandemic and the economic deep freeze. Italy is in particularly bad shape. Growth there has been negligible since 2000; economic output actually fell by 5 percent last year. Before the virus struck, unemployment was stuck at 10 percent (30 percent for the young) and has only gotten worse.   

Now, as the virus seems to have plateaued and Italians begin focusing on resuscitating their economy, they detect scant empathy in Brussels. As UK political analyst Matt Goodwin reports, 88 percent of Italians complain that the “EU is not helping us,” and more than 70 percent say the EU “has not contributed in any way to addressing the crisis.”

Italy was the first country in western Europe in which far right populists (from the nativist La Lega party) briefly formed part of the nation’s governing coalition. If the heavy borrowing and spending necessary to revive comatose economies in Italy and other southern countries sparks another sovereign debt crisis, resentment against the frugal north could turbocharge the populist insurgency. 

That is the political subtext to this week’s call by Spanish Foreign Minister Arancha González for the EU to deliver more generous aid in the form of grants, not loans. “What we are discussing today is not moral hazard, is not prior good or bad management of the economy,” she said, noting Spain’s efforts to rein in public spending and debt in accordance with EU rules. “What we are discussing today is the systemic impact of a pandemic which is a global crisis on all our economies, which as a result increases our national public debt levels.”

Even so, Germany and other northern countries risk triggering a backlash of their own if they relent and embrace either coronabonds or Spain’s call for outright grants. Nationalists across the political spectrum will argue that imperatives of “European solidarity” always seem to mean costly bailouts of fiscally dissolute southern countries.

Americans have a big stake in Europe’s struggles. Jan Techau of the German Marshall Fund warns that Europe could be “the big geopolitical loser of the pandemic.” The crisis could leave Europe “too broke to still be resilient, let alone be a shaper of foreign policy outcomes on its own continent, let along the world.”

An economically enfeebled Europe won’t be able to invest more in defense and hold up its end of the NATO alliance. Nor is Europe likely to recover its confidence as a force for liberal democracy in the world if it’s riven by illiberal populism internally.

In Central Europe, neo-nationalists have seized on the pandemic as a pretext to consolidate political power and suppress domestic dissent. Last month, for example, Hungary’s parliament conferred on Prime Minister Viktor Orban emergency powers to rule by decree until the crisis ends, whenever that might be.

In the past, Europe would have looked to the United States for leadership and help. Trump’s selfish and myopic “America First” stance rules that out. If we want to help Europe survive the COVID-19 crisis, we’ll first have to deal with our own populist problem in November.

Will Marshall is president and founder of the Progressive Policy Institute (PPI).

Tags coronavirus debt crisis Donald Trump Economy of the European Union European Union Italy Populism Viktor Orban

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