The European commissioner for the economy, Paolo Gentilon says it will take an additional €1.5 trillion ($ 1.63 trillion) to keep the EU afloat in the wake of COVID-19 devastation. The commissioner told EU leaders in a summit on the coronavirus crisis, that the European Union urgently needs financial injections to “deal with this crisis”.
As we already know, Europe is going through the worst crisis since WWII, an economic and social slowdown that threatens the union of European states. In his statements before the summit, commissioner Gentiloni cited an International Monetary Fund (IMF) forecast, saying the EU could see an unprecedented 7.5 percent drop in GDP this year. In 2009, during the global financial crisis, the EU’s GDP fell by only 4.4 percent.
The EU commissioner also rejected the idea of common Eurobonds advocated by his own nation and consistently opposed by Germany. He called the approach “backward-looking,” adding that Europe has had “enough of that.” To avoid the fallout from the crisis, Europe instead urgently needs “a common tool to fund the reconstruction,” he said.
Also in the news, Eurogroup – the finance ministers of the Eurozone nations – have so far allocated only €500 billion for funding medical expenses and assisting small and medium-sized enterprises, leaving Europe in need of around €1 trillion more. According to Gentiloni the clock is ticking on these issues:
“We cannot wait until the virus ‘makes peace’ with us before we rebuild. The reconstruction must start now, in spring, in summer.”
Since this mini-summit, Gentiloni did an interview with German daily Der Spiegel in which he claimed the union would not fail:
“Certainly in the early days, we had big problems with coordination. Other countries, as a matter of fact, ratified the closure of exports for medical material. The message of solidarity wasn’t sufficient, at all. European Commission President Ursula von der Leyen rightfully recognized that. But this has changed.”
He did warn that the differences between the various economies could spell doom if the situation is not addressed properly. Many EU nations face a far more grim short term future if Brussels does not step in to support them. He went on to tell the German magazine:
“We run the risk that the differences between the economies of the eurozone and in the internal market become too great, and both fall apart. This would really be a big problem for Germany.”
Germany and other central European nations have long been criticized for keeping the most benefits out of the EU experiment, and the COVID-19 catastrophe is the biggest test over for the league. This Harvard Business Review report reveals some harsh truths about European economies like that of Greece, and how the coronavirus pandemic will ultimately affect weaker states.
“Understanding the Economic Shock of Coronavirus” frames Greece as a so-called “L” shaped economy from the 2008 catastrophe where capital inputs, labor inputs, and productivity are repeatedly damaged. The Harvard experts say Greece and other such EU countries now face an even more dire situation. The think tank of the Foundation of Economic and Industrial Research (IOBE) offered this via Reuters:
“Greece’s economy will contract by about 5.0% to 9.0% this year under baseline and adverse scenarios, hit by lockdown measures to stem the spread of the novel coronavirus.”
If this happens, the civic push for Greece to leave the EU and public debt behind will be irresistible. For over a decade the Greeks have suffered unrivaled austerity and more. What’s about to happen is framed by Lucas Guttenberg, the deputy director of the Jacques Delors Centre, a think tank in Berlin:
“Clearly, it is no one’s fault,” he added, “but if some countries come out of this much stronger than others, that is going to politically undermine the European project as a whole.”
Southern and Eastern Europe face crippling economic depression at the worst possible time. Spain and Portugal are run by left-wing governments deeply critical of the European Union. Italy was about to write off the EU experiment before Germany and others abandoned Italians to the COVID-19 fates. Most Greeks believe Germany still owes them for World War II savagery. Romanians and the Baltic nations are in the midst of pushing back at Central powers’ leveraging them. Meanwhile, Russia and China loom large as new partners toward prosperity.
The outlook for the European Union does not look positive. Southern Europe seems unified in its response to the real inequality of economic and social dealings. At a critical time, Europe failed in the same way America under Trump failed at coordinating against COVID-19. The European Union is supposed to have been built up institutional cooperation across economy, politics, and culture. But the end product seems disjointed, unresponsive, useless against the real threat of a pandemic or any other real crisis.
Unless Germany and the other Northern European members can find a cohesive remedy soon, one of humanity’s best-intended experiments will end in absolute failure. This pandemic could end up being more destructive than the great recession, the migration crisis, and Brexit combined.