NOTHERN AND SOUTHERN LITIGATION IN THE EUROPEAN UNION

The European Union

An ugly North-South litigation is tearing Europe apart over the question of how to respond to the economic wreckage of the coronavirus pandemic, and the national lockdowns needed to stop the spread of the virus. 

Over the weekend, Spain placed its national economy into hibernation, while Italy has extended its lockdown and France is apparently at two-thirds capacity.  Governments must find hundreds of billions, if not trillions, of euros to pay unemployed workers, maintain overworked health care systems and ignite what they hope will be a recovery during the second half of the year. 

Countries in southern Europe led by France, Italy, Spain and others including Greece  have called for a common European response to the challenge like a Eurobond, backed by richer or less rich countries alike.   Even Christen Lagarde, the head of the Central European Bank called for Europe to step up and do what has never been done before like a Eurobond.

But countries in the North, led by Germany and the Netherlands have refused the idea of a Eurobond, which is, as they insist, a “nonstarter” because it would mean that their taxpayers would have to pay for countries, who have long lived beyond their means, as they say.  The stakes are huge.  In the short term, many heavily indebted countries in southern Europe have to deal with an economic collapse on a scale never seen before, with all businesses shut by government order, while borrowing costs are higher than in richer countries, like Germany.  This, unfortunately, limits those governments’ ability to respond to the crisis.  In a longer-term, what the southern Europeans see as a lack of solidarity from the German and the Dutch, whose threats could harm the entire European Union.

The debate is in some ways a repetition of the Greek crisis of 2011 – 2012 and the subsequent fall-out when similar existential issues arose over the different economic customs of southern and northern European countries.  But this time thousands of lives are at stake.  According to Angela Talavera, head of Europe at the Oxford Economics, although she never believed pessimists who predicted the end of the EU, this time she felt there was a real danger. She continued that if the debate turns into “Europe isn’t helping while people are dying in droves” she really fears that the European Union will be permanently damaged. 

There is still almost two weeks for the European Finance Ministers to find a solution and a common response is not impossible, even if it is unpalatable for many countries.  What France and all the other southern countries are calling for the issue of a “corona bond”.  That is a jointly issued bond, that would raise, perhaps, a trillion euros of common funds to help all European countries to deal with coronavirus expenses.

Let us hope that, amid this terrible pandemic which resembles a deadly world war, the world's leaders will take forceful, fair and democratic decisions on these vital issues and please STAY AT HOME.

Let's Stay At Home

Yellow Roses by Frans  Mortelmanns