- By Chris Kremidas Courtney
Giles Merritt surveys the damage wrought by Covid-19 to the European project as well as the global economy, and predicts an unexpectedly rosy future for a reformed EU.
Pundits in the noisy Covid-19 debate divide broadly into two schools of thought. There are those who think the pandemic will be so short that they argue over ways to soften its impact, and others who see it as a global game changer. Sadly, the latter increasingly looks the more likely, with major implications for everyone.
So far, the EU hasn’t come particularly well out of the crisis. Panicky member states hurriedly reintroduced barriers at their frontiers while squabbling over whether and how to bail-out Italy. Brave messages from Brussels haven’t been able to disguise the EU’s fragmentation.
What will remain of the European ‘project’ once the flu recedes? Eurozone governments will very probably cobble together a patchwork of rescue devices to ensure the euro’s survival, but will the goal of ever-closer union have been irreparably damaged?
The EU will not be what it is today
It is clear that the world is entering a phase of ‘Big Government’ in which nation states have to become the main employers by underwriting companies and jobs. Some analysts reckon this will mean the further disintegration of the EU, yet the strong counter-argument is that national governments will be accumulating so much debt they will need to cooperate with each other more closely than ever.
Funding ‘helicopter money’ to private individuals to keep economic activity ticking over may well be the next stage in richer countries, but it would also transform the nature of the global financial system. Even the most spendthrift governments normally run a fiscal deficit of no more than 2-3 per cent of their GDP, but that’s set to rise to 10 per cent or more once they become employers of last resort.
European countries are fortunate in possessing the structures and mechanisms for intensified economic, monetary and fiscal cooperation, either within the eurozone or more loosely through the EU. Once infection rates begin to fall – assuming that re-infections are kept in check – then Europe’s governments will be able to base their post-Corona recovery strategies on intra-EU solidarity.
The EU will not be what it is today. To make its way in a very different world it must be stronger and more united. Nobody can say how badly devastated the United States will be as a result of its unpreparedness, but its role as a lynchpin of the global economic and financial system is going to suffer a hammer blow, with severe worldwide consequences.
The EU will first have to streamline and strengthen itself
The EU is well placed to defend its own interests and to play a heightened role in the ensuing chaos. Just as America’s response to the Great Depression of the early 1930s was President Roosevelt’s New Deal, that of post-Corona Europe must be to champion international recovery measures. That will mean coming to the aid of developing countries and emerging markets as much as those of the industrialised world.
To do so, however, the EU will first have to streamline and strengthen itself. The 1914-18 Great War saw the real beginning of the 20th century, and in much the same way the Covid-19 pandemic could mark the arrival of a European Union fit for the 21st century.
The sort of joint actions that EU member states must envisage will mean signing up to a new level of political union. In other words, they must accept pan-European democratic reforms sufficient to m ake collective EU decisions speedier and more effective. That may sound like wishful thinking, but as the pandemic’s impact grows exponentially it will no doubt look increasingly realistic. If so, it would be the silver lining to the dark clouds of the Coronavirus.
- By Nona Zicherman
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