EU seeks path towards recovery, but populist forces lurk

European Union leaders are meeting on Thursday to discuss how to power the bloc’s economic recovery and help its hardest-hit members weather the current crisis. On the agenda are various proposals to raise a recovery fund, including the option of joint ‘coronabonds’ as well as a stimulus package to address the economic damage caused by the pandemic.

Christopher Way, associate professor of government and an expert in European politics and political economy, says that the task at hand for European leaders is not easy. Failure to act decisively not only endangers countries economically, he adds, but can also embolden populistic sentiment across the union:

“Finding a way to help the countries hardest hit by the COVID-19-induced economic crisis is crucial to the European Union’s future and to blunting the appeal of anti-EU populist parties.

“Many of the countries that bore the brunt of the Great Recession and subsequent sovereign debt crisis, including Italy, Spain, Portugal, and Greece, are once again being hit harder by the current economic crisis. Compared to other EU members, these countries depend more on tourism and travel as engines of their economies, have larger shares of their workforces in sectors that cannot work from home, and have less fiscal capacity to fund relief programs due to debts incurred in the last crisis. To make matters worse, their economies depend heavily on small businesses, which are most vulnerable to prolonged shutdowns. Without assistance from their EU partners, these countries will endure deep and prolonged economic and social crises.

“Unfortunately, the EU’s history of showing solidarity to the very same countries during the Great Recession and refugee crisis does not inspire confidence, and the initial responses to the current crisis have been worrying. Funds from the European Commission’s initial response – the Coronavirus Response Initiative Investment – did not target the neediest countries, with countries in relatively good situations such as Hungary receiving more than harder-hit and much larger countries such as Italy. Proposals for ‘corona-bonds,’ which would raise funds for the hardest hit by mutualizing debt across EU countries, have been shot down by the Netherlands, Germany, Austria, and others.

"It is now up to the European Commission to pull a rabbit out of the hat with a creative proposal when it puts forth a budget plan next week.

“The task is not easy: the best existing support mechanism, loans via the European Stability Mechanism, has become politically toxic in southern countries, whereas more ambitious, solidaristic proposals run afoul of conflicts among member states (particularly between the ‘Frugal Four’ of Germany, Denmark, Austria, and the Netherlands vs the ‘Cohesion Committee’ of France, Italy, Spain, Portugal, and Greece).

“But the stakes are high. Failure to act decisively and solidaristically in past crises has created a tinderbox of potential anti-EU sentiment in the southern countries, and populists such as Matteo Salvini in Italy and Santiago Abascal in Spain are eager to light a match to it. Unless the EU does the unexpected and acts decisively, the future of such right-wing populists is bright and that of the EU dim.”

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