Only a ‘New Deal’ can rescue the European project
If the European project is to survive it requires a plan on the scale of
Roosevelt’s New Deal.
Maria João Rodrigues and Paul Magnette
The combined sanitary and economic crisis that the new coronavirus brings
upon us may in the short term seem one that affects some European Union member
states more than others. But it will soon become a systemic crisis for the EU
as a whole and not just for the eurozone.
Only a very bold and ambitious plan, combining urgent measures and a
long-term vision—as did the New Deal of the US president, Franklin Roosevelt,
in the aftermath of the 1929 great crash—can rescue the European project. This
plan must open a new era of co-ordination and solidarity in the
history of European integration.
When a major and unexpected shock occurs, self-proclaimed prophets emerge,
arguing they had seen it coming and proposing ready-to-use solutions. This
happened after the fall of the Berlin wall, and in the midst of the 2008
financial crisis. It did not happen this time.
This simple fact demonstrates, if need be, that the Covid-19 crisis is the
most unforeseen and the deepest crisis the EU has experienced since its
foundation. In times of uncertainty, we not only need strong and urgent
measures but also a clear vision of where we want to go, once the peak of the
sanitary crisis is over.
Heart-breaking scenario
The least we can say is that this hasn’t happened so far in Europe. The
first weeks of the crisis have seen the repetition of the heart-breaking
scenario of the post-2008 shock—governments acting separately, while the EU was nearly absent from the scene. Given the
daunting task that awaits us, this time we cannot afford to act like that.
In the absence of a strong common reaction, the EU might lose its already
fragile legitimacy in the eyes of its citizens. Populists and nationalists have not
waited to denounce a virus coming ‘from abroad’ and claiming national
protections and the total closing of borders.
While the citizens of the EU are confronted with a dramatic health crisis,
which has already claimed thousands of victims and will deeply hit our
economies and social fabrics, the European Council has proved unable to overcome its traditional
divisions. The political roots of the EU are at stake, and it is not excessive
to say so are its moral roots.
This is not the time to reopen a discussion on the responsibilities of the
member states, or for a beauty contest among the more or less virtuous.
Comparisons with the 2008 financial crisis are inherently misleading. This is
an exogenous shock, and it hits all member states. Some of them might be able
to put on their own recovery plan, with national budgets. But this will not
save them. If some countries face, in the coming months, a structural crisis of
their public health services and a deep and long-lasting recession, all member
states will, at some point, be affected.
In the parlance of the economists, this is a symmetrical crisis with
asymmetrical effects in the short term, but it will soon become a systemic
crisis for the EU as a whole and not just for the eurozone. The EU’s economies
and societies are so deeply intertwined (as the problems in the supply-chains
of medicines and medical devices already demonstrate) that a major shock in
some EU countries will hit the others as well and hence the EU as a whole.
Global dimension
The problem is European and the answer must be European. And a European
strategy must encompass a global dimension too: since the
prosperity of the EU heavily depends on its relations with other regions of the
world, the consequences of the Covid-19 crisis for other continents will also
affect us, eventually.
The plan we call for is based on the lessons drawn from the flaws of our
own EU arrangements and the missed opportunities of the recent past. In the
1930s, Roosevelt was clever enough to understand that the systemic weaknesses
of the USA needed to be corrected if American democracy, citizenship and a
sense of belonging were to be preserved. There is no reason why the EU, nearly
one century later, should not be capable of the same political intelligence.
First, we need a very thorough assessment and a revision of our monetary
and fiscal rules. That the European Central Bank
has acted rapidly to buy national debts, going beyond its own 33 per cent
purchase ceiling of countries’ debt, while the European Commission decided to
suspend the Stability and Growth Pact, is the best demonstration that the EU is
not equipped to cope with such a systemic crisis with the monetary and fiscal
arsenal established so far.
The absence of a real European treasury and a real banking union appear
more than ever as tragic weaknesses for the EU. The existing rescue tools (the
European Stability Mechanism, Solidarity funds …) are much too restricted and conditioned to
offer the reaction we need now.
Gigantic effort
The European Union must seize this opportunity to overcome its divisions
and mobilise the necessary resources both to help the Member States and to
develop its own European action. Issuing a specific kind of European bonds to complement the
gigantic effort already made by member states to strengthen their health
systems and their economies is the smartest and cheapest way to prevent a
violent destruction of human lives and of millions of jobs.
It also necessary to adapt the Stability and Growth Pact, to allow member
states to use public investments as a tool to support economic growth when the
output gap is negative. If we don’t go that way soon enough, the unprecedented
recession the EU will face—with the social hardships this will inevitably
entail—represents an existential risk for the EU.
Secondly, this is also the moment to settle long-lasting internal disputes, to enlarge
the EU’s own resources and to develop its fiscal capacity. Fighting tax
fraud and evasion, while taxing international financial transactions and
imports from countries which do not contribute to the fight against climate
change, will be indispensable to provide the ambitious Multiannual European
Financial Framework, the EU’s long-term budget, which we need to address this
crisis.
Darkest hours
Thirdly, the EU’s silence and quasi-inaction during this first wave of
reactions show that the scope of its co-ordination and its interventions are
not adapted to the challenges of our time. We are the global champions of
research and development and we have developed the most efficient public-health
systems in the world, but yet we are witnessing phenomena of shortage and
breaks in the supply chains which remind us of the darkest hours of our
history.
The commission must validate the tests for the new coronavirus that member
states can use, identify the most promising treatment and invest to develop and
produce in Europe vaccines for all European citizens. Reorganising our public
health systems and correcting these flaws implies a deep revamping of
our internal market, focused on the relocalisation of critical sectors and
enhanced integration of production and supply chains, in vital fields such as
health and food security.
Fourthly, the EU must restore its original ambition to make our economy not
only more integrated but also more inclusive and resilient. Jobs must be
saved immediately and a destructive downward spiral of supply and demand must
be stopped. Companies that will be helped by public authorities, through loans
or equity buying, will have to remember that they were helped to save jobs and
that they share this responsibility. In doing so, many companies and small and
medium enterprises will transform themselves, going digital and hereby becoming
less carbon emitting. A new European industrial, innovation and training
policy should actively support this transformation.
Fifthly, with this sanitary crisis, the European Green Deal has not become
less urgent, as some argue. The loss of biodiversity and our waste-oriented
production and consumption patterns are in large part responsible for the
propagation of the virus and our inability to react properly. The Covid-19
crisis makes the transition of our economies and societies
towards a more sustainable way of life more
urgent than ever.
False argument
Sceptics might argue that such an ambitious plan requires treaty change and
that, in the midst of a global crisis, the EU cannot waste time with such
discussions. But this is a false argument: when the banks needed to be rescued
in the aftermath of the 2008 crisis, we managed to adopt rapid decisions
through regular EU-decision-making processes. And those decisions were included
in the EU’s basic norms after the storm—a process legitimised by the European
Court of Justice afterwards.
More than political divisions and endless legal discussions, what the EU
needs now is a wide mobilisation of its civil society. The deep reconstruction
of our political community this crisis calls for requires a broad public
debate. This must include social partners and civil-society organisations,
academics and journalists—and all the active citizens who think that going back
to business as usual would be the worst historical mistake.
This article first appeared on Euronews and in French in Le Soir.
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