May 19, 2020 - 10:16am
Can the European Union save itself? Yesterday, the FT published a chart that sums up the whole existential crisis. It shows all state aid approved by the EU during the Covid pandemic. Remarkably, just one country accounts for half of it: Germany.
Despite its comparatively light exposure to the virus, the strongest economy in the Union is getting the most help.
Most of this is self-funded, but there are obvious consequences for European solidarity. What makes the situation all the more intolerable is that the constraints of Eurozone membership prevent the weaker economies from helping themselves. There are limits on what they can borrow; they can’t make their own decisions on monetary measures like quantitative easing; and they can’t export their way to recovery through currency devaluation. Even the safety valve of sending their unemployed to find jobs elsewhere in Europe is subject to the effects and after-effects of lockdown.
The single currency was already sucking the life out of the Italian and other economies, but Covid has accelerated the process. Some sort of EU-wide rescue fund is desperately needed, but how to raise the money?
Eurobonds — i.e. debt raised by the European Central Bank and shared by the Eurozone members — was the big idea, but the Germans squashed it.
There is an alternative, however: Get the European Commission to borrow hundreds of billions of euros and dish it out. According to the FT’s correspondents, Ursula von der Leyen, the Commission president, was leading the charge. Except now Angela Merkel and Emmanuel Macron have stepped in to make the idea their own. Their proposal is for a €500 billion recovery fund, borrowed from the money markets and eventually repaid from the EU budget.
The European Commission, which oversees the budget would become a major borrower and a deficit spender — which is hugely significant, because that is how a real government operates as opposed to a quango limited to funds granted it by others.
Governments are only able to borrow vast amounts at affordable rates because they have the ability to service and repay their debts. The Merkel-Macron plan entails the European Commission acquiring that ability.
But how? Well, it could reduce spending on its normal budget priorities (farm subsidies, structural funds etc), but net recipient nations wouldn’t like that. Or it could demand a bigger budget, but net contributor nations would object. Alternatively, it could raise its own revenues through EU-wide taxes, but that’s another giant leap towards fiscal integration. The last resort would be getting the European Central Bank to basically print money on its behalf, but that’s illegal under EU treaties.
One way or another, a Rubicon will have to be crossed.
Given the depth of the current crisis and the size of the Italian and other distressed economies, €500 billion is unlikely to be enough. It is, enough, however, to turn the European Commission into a de facto EU government.
A problem caused by the single currency is thus eroding the sovereignty of EU nations whether or not they’re members of the Eurozone.
Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.
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SubscribeInteresting. Only this morning I encountered an interesting piece from the Gatestone Institute, one that appears to conflict with Herr Franklin’s prognosis. In fact, it speculates that the end of the EU may well be nigh:
“Germany’s Constitutional Court has issued an unprecedented ruling that directly challenges the authority of both the European Central Bank and the European Court of Justice.
“The seemingly obscure ruling, which seeks to reassert national sovereignty over bond purchases by the European Central Bank, has called into question the legitimacy of the EU’s supranational legal and political order.
“The European Union is now engaged in a power struggle with its largest member state, Germany. The legal feud threatens to unravel not only Europe’s single currency, the euro, but the EU itself.”
Here’s a link, so you can judge for yourself: https://www.gatestoneinstit…
You must have missed Peter’s post a couple of weeks ago on this very topic: https://staging.unherd.com/thepost/…
It’s a fast-moving situation. Yesterday we had some of the smaller countries coming out against Franco-German hegemony, and there is no question that if you were to hold referendums in Italy and France (perhaps among others) they would vote to leave.
The battle between the German Constitutional Court and the EU is indeed the big one. Merkel, of course, will side with the EU. Anyway, let’s hope the whole anti-democratic, protectionist, empire-building racket crashes sooner or later.
People need to stop being such cowards and get back to school and work. The country is currently being held to ransom by cowards and charlatans: most of them in or advising the government or working for our national broadcaster and the other horrendous media outlets that afflict our country. Grow a pair people. Some people will die of it. Under one in three thousand people died of the thing in my area. 92% of whom were old or with serious comorbidities. Get a grip! This is not the bubonic plague.
School’s back in, here in NZ. My university student sons are NOT missing my 14yo daughter who tells me the “the teachers have tried…, but forget about social distancing” though her friends were told to form a second group when their sitting circle exceeded 10.
I had telephoned to encourage the school to send home the sick and was heartened to hear they are using some IR thermometers. Experience from pre-lockdown was that parents of unwell kids were slow to collect them and indignant with school staff. A raised temperature is hard to dispute – no so simple with a runny nose, and winter is just starting here.
Only time will tell what is happening re virus transmission. I expect it’s an anxious next fortnight for health officials.
For now, the return to school is good especially socially – I returned from work to find an open beer can (0%) – “the girls saw it and wanted to try it, thought it was disgusting”
Likewise with the return to regular dental practice where we are using all manner of ppe, ventilation and improvised aerosol containment and removal systems. Productivity is steadily improving from half normal – our break even – to alot better as we get used to the new procedures. Some are just better anyway such as patients waiting in their car instead of the waiting room.
Proceeding – with caution.
Your conclusion: “it could be done safely” is not supported by the earlier scientific observation: “The bottom line is we really just don’t know whether children are going to spread this virus to each other, and to their families and the community, once we reopen schools.”
Why does nobody mention Sweden! Whether you agree or not with what Sweden did and continues to do, it must be an absolute treasure trove of data on kids in school over the whole period with high levels of infection in Stockholm in particular and you can compare and contrast with its other cities that had low rates of infection. That must give far better answers to the questions you ask in the first section than anywhere else. Is there some political taboo – “don’t mention Sweden”?
When it comes to re opening bars, again Sweden is a treasure trove of data and a good model of how to do it.
Another great one well done.
So glad we got out and, provided our politicians do not sell us out again through their own self serving squabbling undermining our negotiating position, we will soon be a truly sovereign nation once again. Thank heavens!
I personally think the EU will disintegrate, as it has never been able to satisfy all the diverse interests of its member nations and more often than not ends up locked in an indecision loop, whilst burying everyone with more and more pointless bureaucracy. What has happened over the past few months has just served to highlight this further.
A sensible free trade arrangement for UK would sign post the way for other countries to leave and become part of a much looser free trading community. If we don’t get a sensible free trade agreement, which would be in the interests of all the people of Europe (UK is not changing continents) just not in the interests of the elite who benefit from the political project that is the EU, then we leave without one. I understand that discussions on trade with non EU countries are progressing despite the current situation and the EU does only make up about 7% of the world’s population.
I know the German government has bailed out Lufthansa and the French and to some extent the Dutch likewise with Air France-KLM, but the amounts of state aid quoted by the FT were incredible, if true. Even Belgium had apparently spent as much as the UK.
This is of course one of the highly sensitive elements in the so-called Level Playing Field where the UK is being required to sign up to promise not to distort the market in future by protecting its own businesses against EU competitors. When will we ever learn that most of our neighbours have been doing this for decades. A LPF would entail massive protectionism by the UK against our EU neighbours.
Another load of left wing drivel. Yes our political idiots fail to grasp the basics but do we really want to be ruled by a bunch of left wing numb wits.
No it will be the end of the EU
Rather concerning when a video like this is removed from YouTube….
YouTube is increasingly becoming adverse to dissent, which is the real story. Indeed, Orwell wrote about dissent from the ‘Party Line’.
Spot on
Models came out in January half a million Dead I’ve won my bet however that said .he said what we saw Italy he was right and the nhs needed a break In terms of equipment and personnel which He was correct now we need to ease the brake
Again as a doctor in America said if you live in a bubble with little or no immunity. Your not healthy That how you build up a immunity but hey I need antibiotics I need antibiotics. Oh now they dont work because I didn’t really need them
Maybe you should reflect on what has happened for the last 25+ years where the biggest subsidy scheme in the world has failed to protect the environment or provide cheaper food for the UK with disadvantages to developing countries. As a conservative you should be look ing to support the whole country not just a small group you are associated with in the farming sector. There is nothing wrong with chlorine washed chicken, hormone reared beef or genetically modified plants etc. Maybe rather than trying to restrict the UK opportunities in world trade you should openly advocate for change and the removal of all subsidies. Let’s get some small government and low taxes, no subsidies.