Moving to a different Europe

In spite of all the hostility, including that of the "frugal four " (Austria, Sweden, Denmark, Netherlands), the Europe’s recovery package is a step in the right direction.

by Ulrike Guérot


How long ago was it that we stood on our balconies all over Europe, applauding our medical staff and vowing eternal solidarity? It took Europe a while to pull itself together after a series of panicky border closures. For one historic second, anything seemed possible. Things that had been argued about in vain over months were suddenly possible in the blink of an eye: the suspension of the sixty-percent rule for national debt, the abolition of the "debt brake", that far-reaching German whim that had become the European credo in the 2008 banking crisis, the suspension of the French pension reform, which the "Gilets jaunes" had railed against for weeks. There was soon talk of "corona bonds", one solidarity appeal after the next circulated on the Internet. In the end an invisible virus, Covid-19, accomplished what arguments had fallen short of: Rethinking Europe!

The austerity which followed the banking crisis stalled the European economy rather than stabilising it, but this time round money is being spent like there's no tomorrow. A social crisis should not be allowed to fuel right-wing populism once again. The European rescue package and emergency programmes total around 1.8 trillion euros, including country-specific economic stimulus packages, for example Germany's massive 130 billion euros cash injection. The German stabilisation program is thus about three times as high as the French and more than four times as high as the Spanish equivalent. According to ECB charts, the ratio of Covid-19 exposure to rescue programmes is inversely proportional: those countries that have been - relatively - mildly affected (Germany or Austria) launch the largest stimulus and rescue programmes. Those that have suffered most from Covid-19 (Spain, Italy and also France) cannot do more than they are doing: they are still suffering from the consequences of the last economic crisis which they never really recovered from. Around 52 percent of all state support measures for domestic companies requiring approval were applied for by Germany at the EU Commission, while Italy and France each applied for only 17 percent. As with Formula 1, Europe now has a leading position for those countries that are likely to emerge from the corona crisis faster and better. You could also say that Northern Europe plays A-league and Southern Europe plays B-league.

This is important if one wants to measure the much chided and at the same time long-desired European solidarity. The proposal, which Emmanuel Macron and Angela Merkel pulled out of their hat in May 2020 to everyone's amazement (back before corona, hadn't the German government let a whole six speeches on Europe by Emmanuel Macron go by without even responding?), aims to reduce the widening economic gap between northern and southern Europe. The plan, now called the "European Rescue Package", (ERP) specifically involves 500 billion euros in (non-repayable) direct aid for the countries most affected and a further 250 billion euros in credit lines, whereby for the first time in its history (sic!) the EU itself as a legal entity will (sic!) raise the 750 billion euros on the capital market and then distribute the money within the EU. The 750 billion euros will then be integrated into the EU budget and thus subject to institutional control. 

Regardless of hostility towards this plan, especially from Northern Europe - Austria, Denmark, Sweden and the Netherlands, and there especially from the conservative political spectrum, who have quickly earned themselves the dubious moniker of the "Frugal Four" (the "Stingy Four" would have been more appropriate) - this is not about forging a debt community, and certainly not about pooling of old debts but rather interest rates. As the EU handles the collection of interest and distributes the money, all countries can borrow money on equal terms. This is an important given the vast sums of money that are currently being shifted; otherwise Germany could borrow money on the capital market and pay 0.5 percent interest, while Italy would have a rate of 2.5 percent.

The "stingy" may still be able to push through one or the other conditions attached to the aid, but the ERP should nevertheless be launched. It's a good thing! It is the beginning of a different Europe - more social, more democratic, more sovereign, more supportive - which many people have been longing for. It goes along with tentative first steps towards direct European taxation, as well as social policy measures, for example European unemployment reinsurance. All this is overdue and makes sense. All European citizens rely on the European internal market, but no country can save it by itself. It is therefore in everyone’s interest to stabilise the internal market, and at literally any price. There is simply no room for national "us-and-them" discussions! The majority of European citizens have long since understood this: a survey conducted by eupinions, a Bertelsmann Stiftung project, in March 2020, showed that 71 percent were in favour of an unconditional basic income.

Exporting to China in a bid to sidestep the crisis will no longer work, as the nasty virus has made it clear to everyone that China is anything but a benevolent trading partner. There is no need to even mention Hong Kong. Never before has the European internal market been as valuable as it is today!

Angela Merkel knows all this and, as always, toils silently on her European agenda. She herself has nothing left to lose, only her illustrious entry in the history book. The future will show whether we will be able to speak of a "Hamiltonian moment" for Europe. On closer inspection, the ERP will increase the cross-border fiscal transfer in Europe by a whole 0.6 percent. That is nothing to make a huge leap for; but also nothing to be afraid of. Europe now has a de facto toe in the door to further develop elements of (self-)statehood that it urgently needs. Whether it will push the door wide open is not yet clear.


ULRIKE GUÉROT is a professor, political scientist and publicist. Since 2016 she has been head of the Department for European Politics and Democracy Research at the Danube University Krems in Austria.