MARRIAGE OF INTEREST?

The start was alarming. It seemed that there was no united Europe. At the very first global catastrophe, the countries locked themselves and not only did not think about joint actions and helping neighbors, but even tried to snatch each other’s good. Moreover, even the driving force of the united Europe - Germany and France - also were doing the same.

“This was not our best moment,” a senior European diplomat admitted to the BBC, recalling how EU countries hastily closed their borders with each other in an attempt to protect themselves from the spread of the virus and initially refused to help Italy, which the tragedy hit first. “Our reaction came late and was overshadowed by nationalism.”

Diplomat recalled that in February, Italian Prime Minister Giuseppe Conte urgently requested gloves, clothes, as well as test kits, ventilators from European countries for hospital staff, but there was silence... Only a few days later, some of his colleagues said they would try to help. And the actions of German, French, and Czech authorities could generally be considered criminal when they decided to block the re-export of medical equipment through their territories to Italy, until they finish calculating their stocks.

At the beginning of the pandemic, many in Europe had a feeling that the EU was more a marriage of interest than an alliance of countries connected by values and a sense of solidarity.

Counting the dead

Italy and Spain led by pro-European governments have only recently were able to win a difficult victory over right-wing radical forces seeking to withdraw these countries from the EU. And now they are faced with a sharp increase in anti-European sentiment among their voters.

The video of the burning of the EU flag became viral in March-April in Italian social networks. There are already signs that faith in the EU is severely undermined. At the same time, the popularity of non-partisan law professor Giuseppe Conte has sharply increased for his actions during the crisis to the unprecedented level in Italy - 71%. In a survey conducted in March, 67% of Italian respondents said that EU membership was disadvantageous for the country. Even among the pro-European elite, there was a growing sense that the country was abandoned by its neighbours, that the EU had turned its back on Italy when it most needed help.

The leader of the Italian movement We Are Europeans and the Permanent Representative of Italy to the EU, Carlo Calenda, admitted that even now he is experiencing a crisis of faith in an idea for which he struggled all his life. According to him, he does not know what to answer to the members of his party who ask him: “Why do we want to stay in the EU? It's useless".

Obviously, radicals of all stripes are trying to take advantage of these social sentiments. The former deputy prime minister and one of the leaders of the North League, Matteo Salvini, tweeted: "We must reconsider the issue of Europe (EU) and the role of Italy in it."

The ratings of the far-right Brothers of Italy Party, whose leaders declare: “As long as we count our dead, they consider the risk of losing interest in their bonds,” have been steadily growing in recent polls.

Marshall Plan is required

Italy entered a crisis with a debt to GDP ratio of 136% - the highest in the Eurozone after Greece. In fact, EU rules require not to exceed 60%. Economists predict a reduction in the country's GDP from 6% to 15%. There is a real threat of default.

The situation in other European countries is no better. According to IMF estimates, the pandemic will turn into a global recession - the deepest since the Great Depression of the 30s of the 20th century. According to forecasts, in the Eurozone the economy will go down by 7.5%.

Spanish Foreign Minister Arancha González compared the current situation to the wreck of the Titanic and advised against dividing passengers into first and second classes.

German politicians also support the idea of the Marshall Plan. According to Deutschlandfunk, assistance under the European Stabilization Mechanism should be provided without the usual conditions. The path to obtaining these funds needs to be facilitated and shortened, because Italy or Spain suffer so much from the crisis, not because they built their economy incorrectly, but because of the virus epidemic. “Germany has no right to get out of this crisis as a sort of accountant throughout Europe,” Deutschlandfunk writes. “We need a solid support fund of several hundred billion euros, which will not impose a monetary policy for the foreseeable future, but generously provide the countries with funds they need.”

Coronabonds: to be or not to be?

In March, when the virus had spread throughout Southern Europe, nine EU members (Belgium, Greece, Ireland, Spain, Italy, Luxembourg, Portugal, Slovenia and France) signed a joint letter calling for the issuance of special Eurobonds. Or, as they called them, coronabonds - debt obligations supported by the all EU members to help pay for efforts to restore the destroyed economies of their countries.

The head of the European Central Bank, Christine Lagarde, endorsed the idea. And in the second half of April, the EU Parliament adopted a resolution on “restoration bonds” that are “guaranteed by the EU budget”.

Public opinion has changed in Germany. If earlier economists and politicians during the recent financial crisis opposed the mutual consolidation of the Eurozone debts, believing that this would not save Greece, now they are calling for help Southern Europe to cope with the coronavirus through Eurobonds. Even the German Bild, which was heavily criticised for anti-Greek campaign ten years ago, now calls for coronabonds. The current situation is more like a natural disaster than a crisis caused by risky lending.

Federal Eurobonds will increase the fiscal potential of the Union without increasing the burden of public debt, thereby saving money from national treasuries. If Germany, the Netherlands and other countries of Northern Europe do not accept Eurobonds during such a large and existential crisis, this will raise questions about the long-term survival of the euro, experts say, including German ones.

However, the leaders of the Northern European countries (Germany, Austria, Denmark, Finland and the Netherlands) still do not agree with experts, refusing to support joint borrowing. They explain this by fears that taxpayers in richer countries will be forced to repay the debts of fiscally irresponsible countries.

Sorry Italy!

Yet it will be wrong talking about the complete absence of European solidarity. There are countries that accept patients from other parts of the continent for treatment. In Germany, patients from France, Italy and Spain undergo treatment. EU members supply each other with free medical supplies and equipment, exchange medical teams, and jointly carry out orders. In addition, priority green lanes are established for the movement of trucks on their territories so that the export and import of food and medicine does not have obstacles due to forced quarantine measures.

European authorities provided a huge amount for the development of coronavirus vaccines, which will be available worldwide. The European Commission has also temporarily suspended the Eurozone's rules on public debt and budget deficits, allowing states to spend as much as they need to survive the outbreak as best as possible. The European Central Bank has launched a program for the purchase of securities of private and public sectors (750 billion euros). Moreover, about 11.8 billion euros have already been spent on the purchase of Italian government bonds.

In early April, the government of the Netherlands, a country that has traditionally been a staunch opponent of any direct budget transfers between members of the eurozone, decided to create its own solidarity fund (20 billion euros) to finance emergency medical expenses in Italy, Spain and other countries.

Thus, the EU acts quite effectively using the mandate given to it by the nation states. The health system is managed by each individual country. Moreover, there are 27 different health systems, 27 different levels of morbidity and 27 different priorities with regard to the development of the economy affected by coronavirus in the EU member states. Under these conditions, Brussels is still trying to work out some general rules.

In particular, the European Commission insists that EU countries remove their quarantine restrictions only if:

# The number of deaths/cases in the country is reduced and stabilised over an extended period of time;

# If necessary, the national health service can cope with the surge of new infections.

# An EU country has sufficient testing potential to detect and quarantine new infected, as well as contacts of infected people, to protect those who have not yet become infected.

Finally, the EU leadership had the courage to apologise to Italy for its sluggish actions at the beginning of the epidemic.

On April 16, EC President Ursula von der Leyen said that the pandemic cannot be defeated “without the truth about our own actions. Yes, it is true that no one was really ready for this. It is also true that too many were not there on time when Italy a needed a helping hand at the very beginning. And yes, for that, it is right that Europe as a whole offers a heartfelt apology…” she said.

Rescue plan

The EU summit on April 23 seems to have greatly rehabilitated the EU in the eyes of Europeans by adopting a package of financial support worth 540 billion euros, which will become effective on June 1.

The main conductor of the rescue plan is the European Stabilization Mechanism, which will allocate 240 billion euros for the costs of debtor countries. The European Investment Bank will provide 200 billion euros for national short-term programs. €100 billion will be used to finance national wage support schemes based on the German Kurzarbeit system, which has become popular in other countries of the continent.

This package complements the earlier decision of the EU to weaken the usual rules for the provision of state aid and public procurement, as well as the actual suspension of the Stability and Growth Pact (it provides for control over tax and budget policies and sanctions against violating countries) during the crisis.

In addition, European leaders agreed to create a new recovery fund, potentially worth 1 or 1.5 trillion euros. The question remains open about the structure and financing of this long-term recovery plan. Proposals may include an increase in the EU’s total budget, grants for affected countries, or a joint sale of bonds (the same coronabond that Italy, Spain, France and others insisted on) to raise funds.

The EU also plans to help block foreign acquisitions of European companies affected by the pandemic. EU is afraid that foreign investors may try to acquire European companies "in order to take control of key technologies, infrastructure or expertise." European companies have long been in sight of Chinese competitors, including large state-owned enterprises. A sharp economic downturn and the ensuing inevitable drop in stock prices may make them more vulnerable to foreign bidders. These and other issues are on the agenda of the next summit, which will be held on May 6.

It seems that these decisions suited everyone, including Italian Prime Minister Conte, who expressed satisfaction with what was agreed upon, calling it “an important milestone in European history.” “Our faith in Europe turned out to be true!” immediately after the meeting, the President of the European Parliament, Italian David Sassoli, tweeted.

Apparently, the EU is not going to break up, but the effectiveness of the taken decisions will show whether scars remain on its body. The Croatian newspaper Novi list describes the situation this way: “One day the pandemic will go away. However, on this Day Zero, the starting positions of countries will be very different. If the overall loss turns out to be too high, it will bring enormous unemployment, and then the collapse of the social security system and the inevitable political crisis will follow. And this means that the EU and the rest of Europe will no longer be the same, and above all, politically.”