The COVID-19 pandemic is impacting all domains of the world, with both human and economic consequences. In particular, this public health crisis is currently testing the strength of unity within the European Union (EU) as well as its economic foundations. How well the EU mitigate and respond to this risk will be reflective of the EU’s prognosis as a successful political and economic entity. The ‘European idea’ is at stake here.
As French President Emmanuel Macron stated in an interview with the Financial Times, financial and political solidarity is required in these difficult circumstances. Some countries are more vulnerable to the primary and secondary effects of the pandemic, particularly southern Europe, whereby they will require greater assistance.
Fear, blame and misinformation pose threats to the social fabric of the EU and threatens its very pillars of social cohesion and unity. This crisis provides an opportunity for the EU to eradicate the growing Eurosceptic populism metastasizing throughout the bloc. Populism has been an agenda item for the EU as it is a poison that threatens EU stability. Plenaries have included strategies in combating it such as greater social connection between Brussels and local authorities of EU countries and appealing to the needs of the EU citizen. Brexit did not minimise Euroscepticism whatsoever and has added fuel to the fire of populism. As the COVID-19 crisis intensifies, fear and blame are rife among the people as well as the consumption of disinformation. A collaborative response among EU countries will assist in eroding identity politics, a main driver of populism. The COVID-19 pandemic provides the opportunity to reaffirm faith in mainstream political parties within the EU. If the EU do not produce a coordinated response with shared solidarity from Brussels, populist leaders will seize these fears to gain greater support.
The coronavirus has hit European economies like a truck. With the private sector of Europe being inactive, public debt is growing with investors selling Italian, Greek, Spanish and Portuguese government bonds. Given the European Central Bank (ECB) is part of the ‘Big Four Banks,’ its actions will have significant effects on the rest of the world. With the Eurozone currently experiencing low inflation and low growth, the coronavirus could not have emerged at a worst time. The EU is now faced with the adverse task of stabilising the economy and avoiding another Eurozone crisis. The International Monetary Fund project the Italian economy to contract by more than 9% in 2020. With the 2010 Eurozone crisis stretching the monetary architecture of the Eurozone, how many hits can the European economy take? It is enough that 19 economies have converged, however, can the European Monetary Union ensure monetary cooperation and budgetary discipline? After all, the EU and the rest of the world are heading for a recession with huge outflows of credit funds in the Eurozone. It is no secret that the 19 countries of the Eurozone are carrying a heavy weight. The amounting public debt is a reality, with countries now debating coronavirus economic response.
The EU’s recently announced Pandemic Emergency Purchase Programme (PEPP) will help mitigate some of these economic fears and put a damper on the rising populism. In March, the ECB announced a €750 billion PEPP. The ECB is committed in delivering this relief fund through the purchase of private and public sector bonds. As a stimulus package, its purpose is to provide confidence and stability to European economies and to avoid financial fragmentation within the Eurozone. With the additional €120 billion released on 12 March, this adds up to 7.3% of euro area GDP. This sound course of action provides evidence of the European solidarity that is required.
The EU can either exit this pandemic with stronger unity and flourish into the future as a multilateral organisation. The other option is for this pandemic to be a catalyst for the dissolution of the EU. The former requires greater collaboration with targeted responses including strong fiscal policies. EU citizens of the Eurozone need to understand that they are inevitably in the same boat. In the words of David Sassoli, President of the EU Parliament, “we must prove to our citizens that the European Union is the answer to this emergency and the crisis which will follow.”