Coronavirus Shows Up The EU

The coronavirus is crippling the EU’s ability to keep itself financially afloat. As governments institute lockdowns which are having huge economic impacts, governments within the EU are trying desperately to find a way to keep themselves economically viable whilst not risking their citizens. The virus unlike the recession which preceded it or will likely follow it doesn’t care about how wealthy or poor a nation is, on its path to destruction it takes all within it. Unfortunately, the EU does care how wealthy a nation is and this is the very thing that could well hinder it the most.

Italy and Spain, both of which have recorded some of the highest levels of deaths from the virus are also two countries  who have long struggled with getting their books balanced. The coronavirus has worsened this issue, and as both nations try desperately to prevent their economies from flatlining they have appealed to their wealthier northern neighbours for assistance. Unfortunately, just like during the economic crisis of a decade ago the northern EU nations led by Germany are refusing any such assistance. There seems to be a very strong desire within Germany to let the Italians and Spanish suffer through this on their own, whilst dangling the prospect of bailout loans with strings attached, strings that no sensible politician would agree to. Italy especially would be loathe to put itself under the supervision of the so called troika of the European Central Bank, the European Commission and the International Monetary Fund, given the recent history of what the three enforced on Greece. 

These actions are  understandably causing a lot of resentment in places like Italy and Spain, and relations are not being helped by some flippant comments made by members of the northern alliance. Dutch finance minister Wopke Hoekstra seemed to sum up the northern attitude to this whole issue when he said. “Perhaps the European Commission should conduct a report into why some countries lacked the fiscal space to weather the current crisis.” 

But why is it that the Northern  Alliance seem so much more financially secure compared to their Southern neighbours despite them all being in the same union? The answer to that lies within the central framework of the EU itself. The EU has ensured that governments cannot support local industries and has through use of the Euro taken away the main plank of economic policy: currency. The Commission made demands of its member states to cut spending on healthcare provision and to privatise or outsource healthcare services between 2011 and 2018 in order to meet debt and deficit targets which the EU has enshrined.

Consequently, whilst countries such as Germany and France can more reasonably cope with a crisis such as the one currently facing the world, due to their strong economies and their roles as leaders in the EU, countries such as Spain and Italy are struggling to cope. They are trying to fight a virus that is everywhere with a debilitated healthcare service (due to EU cuts) they are also trying to do it without the support of a central bank. Unlike the UK, they cannot monetise extra public funding to hire hospital staff and equipment or even provide relief to quarantined workers. Instead they have to go begging to the European Central Bank and other institutions within the EU to ask for assistance, whilst those same institutions use their past history against them to deny them aid.

These divisions have naturally stalled any attempt by Ursula von Der Leyen and the European Commission to get a ‘Marshall Plan’ of sorts together to assist the member states of the EU during this crisis. Consequently, the European Union seems to be less of a Union and more of a hodgepodge of states, each with their own desires and limits. Something that should have already been obvious to anyone who knows anything about geo-politics.

No nation would willingly bail out another nation unless absolutely forced to, or unless they wished to gain something from it. The US’s own Marshall Plan was exactly that. A way for the US to both stimulate growth in Europe whilst at the same time ensuring that European nations followed the American Capitalist model and moved away from Communism and the Soviets, out of a sense of gratitude. Unless the European Commission and the EU are willing to pursue a similar double handed strategy, which seems unlikely, do not expect any sort of EU wide bailout plan during this crisis. Do not even be surprised if there is a further splintering within the EU as well. 

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