The EU can emerge stronger from the coronavirus crisis

Opinion piece (Encompass)
Agata Gostyńska-Jakubowska, Luigi Scazzieri
01 April 2020

The coronavirus pandemic has become a stress test for the European project. It has encouraged Eurosceptics to accuse the EU of doing too little too late to fight covid-19 and created an opportunity for some illiberal leaders to expand their powers under the pretence of the emergency situation. The adoption of the so called ‘Enabling Act’ in Hungary is a case in point.

Strongman leaders such as Hungary’s Viktor Orbán will take advantage of people’s fear about the pandemic to bash the EU and to strengthen their own power with authoritarian measures limiting citizens’ freedoms. But it would be wrong to jump to conclusion that the crisis will inevitably lead to a weakening of the EU, or even to its collapse. Instead, as we argued in our recent research paper for the Centre for European Reform, Covid-19 also creates an opportunity for the EU to prove its worth and encourage the public across the 27 member-states to rally behind multilateral co-operation rather than protectionism and self-isolation.

The EU’s initial reaction to the outbreak did not bode well for its image in the eyes of average citizens. The Commission appeared powerless to co-ordinate member-states’ introduction of border restrictions. And, as the death toll in Italy mounted, member-states showed little solidarity with Rome, with France and Germany restricting the export of medical equipment. If this was not enough, European Central Bank President Christine Lagarde prompted a sharp sell-off of Italian sovereign debt with her careless remark that the ECB did not aim to narrow the difference between member states’ borrowing costs. Some polling suggests that two thirds of Italians now consider EU membership to be a disadvantage to their country.

EU institutions and member-states have done much to correct their early missteps. Ultimately, the crisis can only be solved through a mix of national measures and European cooperation. The Commission relaxed its state aid rules, allowing member-states to offer liquidity to businesses in need. The EU also suspended the application of the fiscal rules in the Stability and Growth Pact, allowing member-states to increase budget deficits to limit the economic impact of the pandemic. Finally, the ECB’s announcement of a €750 billion Pandemic Emergency Purchase Programme (PEPP) on March 18th has improved markets’ confidence that the central bank is willing to do what it takes to mitigate economic damage.

These are all important steps to help member-states offset the economic fallout of the pandemic. But as the number of infections and deaths mount in Europe and many member-states’ economies suffer as a result of ‘lockdowns’, it is unclear if they will have sufficient economic impact. The crisis risks boosting eurosceptic sentiment if the EU is perceived as ineffective, or worse, getting in the way of member-states’ response. Even though the EU itself has limited competencies in the field of public health, the risk is that electorates will blame it if coordination between member-states fails. Moreover, the crisis could undermine some of the EU’s fundamental pillars: greater unemployment could lead to hostility to the principle of free movement of workers that underpins the Union’s single market.

EU leaders need to act boldly to show the public that they are not willing to let their longstanding divisions on a number of issues (including on developing a common European debt instrument to keep borrowing costs down) stand in the way of the joint fight against coronavirus. Hawkish northern eurozone members, which have traditionally opposed the idea of risk-sharing in the eurozone, should understand that virus is also likely to hit them severely - irrespective of how well their economies had been performing prior to the outbreak.

At the same time, the EU cannot lose sight of potential democratic backsliding in member-states such as Hungary. It needs to monitor the introduction of emergency measures across member-states to ensure that they are not in violation of the EU fundamental values or kept in place for longer than needed.

The best answer to criticism from eurosceptics is to show that the EU is doing a good job on the issues for which it has competence, without trying to elbow member-states out of the way when it comes to the organisation of national healthcare systems or helping national businesses to weather the economic storm. But the EU also needs to make clear to its member-states and its public that it will not tolerate any attempts to use pandemic as an excuse to undermine democracy, and that it is ready to sanction those states which try to do so.

The EU should keep citizens updated on the measures it is taking to support the European economy, and highlight what the bloc can do in other areas, such as organising common procurement of medical equipment. This will also help counter misinformation about the virus, be it from within Europe or nefarious outside actors.

The EU leadership also needs to try harder to get the message across about the negative implications of the lack of greater European co-operation in countering the pandemic. These efforts, however, will fail if national leaders do not stress the importance of European co-operation in fighting the crisis Ultimately no member-state can deal with the pandemic of this scale on its own and EU leaders should be honest with their public about it.

The EU’s response to the global pandemic will shape its future, and exert a profound influence on how its citizens view it. If it, on the one hand, gives the member states the economic space to respond to the coming recession, co-ordinate their efforts to counter the outbreak, and – on the other hand – fight any attempts to undermine the rule of law of law, the Union has a chance to emerge from the crisis stronger, and with its image greatly enhanced.

Agata Gostyńska-Jakubowska is a senior research fellow and Luigi Scazzieri is a reasearch fellow at the Centre for European Reform.