For a second time in a decade, a stark challenge to the continuity of the EU is taking place and its political leaders have not been up to the challenge on both occasions.
The European Council of 23 April ended without a clear consensus on how to relaunch the European economy in the wake of the Covid-19 pandemic. Today, 24 April, the markets have already reacted. Negatively: the stock markets plunged and the interest rates on the debt of Southern European countries increased.
As a political scientist, the results of the European Council, together with the feeble agreement reached at the Eurogroup meeting a few weeks ago, do not surprise me. In fact, I was expecting those results. One of the most important things that political science teaches us is that the fate of polities depends on the quality of its leaders. Unfortunately, the European Union has been lacking quality leadership for the past decades.
A few weeks ago, the remarks of Dutch Minister of Finance, Wopke Hoekstra, sparked an unusually harsh reply from the Portuguese Prime Minister, António Costa, who dubbed the words of Hoekstra as “repugnant”. The Dutch minister said it should be investigated why Spain or Italy do not have budget surpluses that can enable those countries to deal with the effects of Covid-19. The Portuguese Prime Minister stated that “we are not willing anymore to listen to things like these or like what Jeroen Dijsselbloem said” during the bailouts to Southern Europe in the wake of the sovereign debt crisis almost a decade ago (the then Dutch Minister of Finance stated that Southern European countries spend all their money on wine and women). António Costa further added that this recurrent pettiness is undermining and destroying the EU.
The words of António Costa have sparked a wave of solidarity among Southern Europe and other countries willing to challenge the rule of the mightiest, coming forward with bold plans to launch a Marshall Plan for Europe and the so-called Coronabonds or Eurobonds. The major point of contention for countries like the Netherlands, Germany, Finland or Austria, who oppose these measures, seems to be the moral hazard associated with letting the PIGS (Portugal, Italy, Greece, Spain) receive money without a conditionality that can anchor them to sound finances. A position which is in fact equal to that adopted with regard to the sovereign debt crisis a decade ago.
Then, as now, the political leaders opposing the mutualization of debt and demanding more austerity seem unable to grasp that they are ruining the EU project. The bailouts to several countries in the previous decade were enacted in return for a disastrous austerity that destroyed their economies. This disastrous mismanagement of the sovereign debt crisis by EU leaders, in particular by Germany, Finland, Austria and the Netherlands (the same four as today), not only fuelled anti-EU feelings in many EU member states but was also responsible, to a large extent, for the wave of populist, anti-democratic leaders that emerged in Europe.
Today’s mismanagement of the Covid-19 crisis and ensuing economic crisis not only risks increasing the same trends, but also destroying the EU. In fact, when Italy launched an appeal for help as it was submerged by the Coronavirus, EU countries failed to reply in the early days, an act for which Ursula von der Leyen apologized a few weeks ago. Too late and meaningless. Solidarity with Italy came from China, Cuba and Albania. As a result, the EU approval rates in Italy have decreased dramatically. Although I do not have any figures, I suspect that a similar drop of EU approval rates has taken place in Spain, which is one of the most affected countries by the pandemic.
Similarly, the European Commission and several governments are now devising ways of limiting Chinese acquisitions of bankrupt European companies and Chinese influence at large in member states. However, thanks to the mismanagement of the sovereign debt crisis of the previous decade, the Chinese already have a very relevant presence in EU member states. For example, Chinese company Three Gorges bought the Portuguese energy giant EDP and Chinese Cosco firm acquired a majority stake in the Piraeus port. Several of the most affected countries by the sovereign debt crisis have also signed agreements with China in the frame of the Belt and Road Initiative, while Italy has become the first G7 country to join the initiative.
On the domestic front, the political leaders of the EU’s most powerful member states are far from consensual, including Angela Merkel and Emmanuel Macron. Indeed, Macron has been facing continuous opposition to his plans to fully neoliberalise France, including fierce opposition from the Yellow Vests movement. A month ago, French doctors filed a law suit against the French government, in the face of gross mismanagement of the Covid-19 pandemic related to the lack of medical equipment. As for Merkel, the so-called “leader of the free world”, her party has been steadily losing its share of votes in elections (local and national) in the last decade. A firm policy of low wages, precarious jobs, lack of public investment in infrastructure, privatizations, and growing poverty (that is visible even for the casual tourist) has left many Germans asking what are budget surpluses for.
While the horror and destruction of World War II affected almost all European countries and thus forged a common notion that it would take a collective effort to recover and to guarantee it would never happen again, the sovereign debt crisis and the Covid-19 are mostly affecting South European countries. The major difference is that today’s leaders fail to see the menaces to the European project that stem from these two events. Thus, the richest EU countries seek individual salvation and look at the poorest as a dead weight. This short-sightedness lays bare that the current leaders of Europe’s great powers lack the statesmanship of, for example Konrad Adenauer, Winston Churchill, Helmut Kohl, or François Mitterrand.
After Covid-19 is gone, Southern Europe will remember who helped. The damage has been done. Additionally, and more importantly, the rise in debt interest rates will further destroy their economies. For a second time in a decade, a stark challenge to the continuity of the EU is taking place and its political leaders have not been up to the challenge on both occasions. As the United States loses centre stage, the EU is incapable of assuming a leadership position in world politics. Now would be the time. The mismanagement of this crisis and selfishness will be fatal to the EU.