Divisions bred by pandemic cast shadow on Europe Day

By Agnes Szucs

BRUSSELS (AA) - On May 9, 1950, French Foreign Minister Robert Schuman called on Western Europe to pursue cooperation in the steel and coal industries.

It was the first time that the defeated and isolated Germany was offered a chance at a partnership.

Schuman believed the move could be a harbinger of peace and prosperity for the war-torn continent, as the industrial cooperation would gradually extend to other economic areas and, in the long run, lead to political coordination.

The European Union, as we know it today, was based on this very idea.

Seventy years later, as we celebrate Europe Day honoring the Schuman Declaration, the COVID-19 pandemic has deepened divisions between member states to a level previously unseen in the post-war era.

At this point, it is uncertain if the European Union we know today will even exist tomorrow.

The 27-member bloc is struggling with the deepest recession of its history, as pointed out by its economy commissioner, Paolo Gentiloni, earlier this week.

In the past two months, many of the EU’s core principles have been challenged and shaken.

Free movement of people and goods was severely restricted due to border closures in the Schengen area, while member states engaged in a race to stockpile and procure medical equipment and drugs.

- Divergence and divisions

Hard hit by the pandemic, the Mediterranean countries – particularly Italy, Spain and France – have repeatedly called for solidarity in the fight against COVID-19.

They plead for a modernized Marshall Plan to launch an EU-wide economic recovery program, jointly financed by all member states.

But a group of rich countries committed to budgetary discipline – mainly Germany, the Netherlands, Austria, and Finland – seem to oppose the idea, fearing it may lay the foundation of a financial system granting permanent transfers to southern countries with high debts.

The two groups have a very different perception of what has happened since March.

French President Emmanuel Macron often uses war rhetoric in the context of the COVID-19 outbreak, while his Italian and Spanish counterparts keep referring to the 1948 US aid program meant to restore devastated Western European economies.

According to the latest economic forecast of the European Commission, these economies will shrink up to 9.5% in 2020.

In Spain and Greece, one in every five people will be out of work in the coming two years.

Greece and Croatia may have survived this phase of the pandemic with relatively low numbers of infections and victims, but their real hardship will start with this summer of no tourists.

It is no surprise that these two governments are the most eager to propose creative holiday ideas, as they look to save at least a fraction of their main source of income.

The northern countries are expected to lose around 6% of their GDP in 2020.

But they have much more room to maneuver and relaunch their economies due to greater savings and better credit conditions in international financial markets.

The difference in the scale of state aid programs in the southern and northern countries is already significant and may soon result in even greater inequalities.

Leaders of the frugal countries are right in reminding their southern counterparts of the importance of budgetary discipline, something they have been obliged to do since the eurozone’s foundations were laid nearly 30 years ago.

However, the Mediterranean countries also have a point when they say that it has been the northern economies, with their export-oriented high-tech industries, who have profited most from the common currency.

- Sharing an uncertain future

The European integration project followed Robert Schuman’s playbook for a long time.

First, steel and coal cooperation did gradually expand to all sectors of the economy.

Then, step by step, member states harmonized quality standards, abolished borders, agreed on similar employment norms, and eventually introduced the euro.

However, contrary to Schuman’s vision of economic cooperation leading to political union, the EU has remained an economic partnership at its core, despite the institutional and legal framework created.

It was already clear at the creation of the eurozone that a monetary union needs to be backed by a fiscal union to guarantee economic stability.

However, EU states did not have the political commitment to give up on their fiscal sovereignty. The fallibility and failed structure of the monetary union was clearly revealed during the 2009 eurozone crisis.

In the past 10 years, EU states have not been able to agree on a solution that would effectively bail out countries in times of economic shocks.

Compared to today, the 2009 crisis was relatively small and affected a limited number of economies.

Italy and France, said to be too big to fail, did not face the grave danger they do today.

In essence, the COVID-19 crisis has proven to be a test of the final stage of Schuman’s vision.

The northern countries have the right to not reach out to the ones in need and protect their own fiscal interests rather than bail others out.

But at this stage of the integration project, with such deep ties and mutual dependencies, the decision may likely have devastating effects on their own economies.

As Thierry Breton, EU commissioner for internal market, reminded this week in an interview, 60% and 50% of the Netherlands and Germany’s total exports go to other EU countries.

Without the EU market, their industries would also die, he said.