The coronavirus crisis risks becoming an existential crisis for the European Union, say diplomats and analysts, as the EU struggles to coordinate a financial response to the pandemic.
Last week, the EU’s national leaders struck an interim agreement on a recovery deal with an emergency fund of about $581 million (a half-billion euros), which the hardest hit member states can tap into for immediate assistance.
But the wrangling over how to cope with the economic impact of the pandemic is far from over, and the overall $2 trillion-plus economic package mooted last week by the national leaders includes the budget costs of the EU itself for the next seven years.
In fact, no final numbers, aside from the emergency fund, have yet been agreed upon, according to analysts. Members states already were at loggerheads over money before the coronavirus appeared, with sharp arguments between them about how to make up for the loss of Britain’s financial contribution to the EU.
The emergency relief package came after an ill-natured squabble and warnings by Italian Prime Minister Giuseppe Conte that the EU project itself was in jeopardy unless the wealthier northern states help bail out their poorer southern neighbors. It also has left unresolved whether aid from the emergency fund to countries like Italy and Spain will be in the form of loans, which must be paid back, or grants, which won’t.
Another key issue is whether the eurozone countries will eventually have to mutualize their debt by issuing jointly so-called “coronabonds” to meet health-care costs and mitigate the impact of a deep economic slump, one that could rival the Great Depression almost a century ago.
As the behind-scenes quarreling continues over money, euro-skepticism, which before the pandemic appeared to be ebbing, is rising once again. It’s being fueled by southern Europeans smarting over what they see as an absence of solidarity by the more affluent nations, reminiscent, they say, of the debt crisis following the 2008 financial crash that nearly tore the EU apart. The pandemic is opening up the wounds of that crisis, which also saw a sharp split between the north and south.
“The coronavirus pandemic could well be the ultimate acid test of its resilience as a community based on solidarity and common values,” according to Stefan Lehne of Carnegie Europe, a think tank based in Brussels. In a posted commentary, he wrote: “The mindset of everybody for itself, which is so tempting under the acute stress of the crisis, must be countered by stepping up cooperation and mutual assistance among the member states. Otherwise, the EU will be in great danger.”