Oh, Mr Euro

David Adler and Anton Jäger

Over three days and two nights of teleconference, the finance ministers of the Eurozone fumbled their way towards an emergency response to the Covid-19 pandemic. No comments were recorded, no minutes taken; the Eurogroup, an ‘informal’ body headed by a president known as Mr Euro, isn’t obliged to disclose the details of its internal discussions. Still, we know that last week’s marathon meeting followed a familiar script. The PIGS (Portugal, Italy, Greece, Spain) aimed high with a demand that the Eurozone share the burden of the crisis with a jointly issued debt instrument known as a coronabond. The FANGs (Finland, Austria, Netherlands, Germany) beat them back down, proposing that each member of the currency union bear its debts alone. And Mário Centeno, the Portuguese finance minister and current Mr Euro, brokered a late night compromise. ‘At the end of the day, or should I say, at the end of the third day,’ he announced, ‘what matters the most is that we rose to the challenge.’

Oh, Mr Euro. The monsters of the last crisis were hardly exorcised before the coronavirus arrived to haunt the continent. Since the May 2019 elections – when support for the EU and turnout in its parliamentary elections were on the upswing – EU leaders had grown accustomed to boasting of the Union in a less shaky voice. ‘This is the European way: we are ambitious. We leave nobody behind,’ the European Commission president, Ursula von der Leyen, proclaimed in her opening speech to parliament. ‘We need to rediscover the power of co-operation,’ she told the World Economic Forum in Davos three months ago, ‘based on fairness and mutual respect. This is what I call “geopolitics of mutual interests”. This is what Europe stands for.’

In January, the Commission and its ‘pro-European’ allies could reasonably say that they had triumphed over the populist menace facing Europe. It was no small feat. They had co-opted their right-wing challengers, installing Frontex to crack down on migration at the EU’s outer borders and ramping up the rhetoric on immigration. They had openly repressed their left-wing challengers, imposing austerity measures on ailing member-states and defanging their rebellious governments in the process. And they had presented a united front in the face of the hapless British decision to leave the Union, making clowns of continental politicians who had dared to stand on a similar platform, from Marine Le Pen to Matteo Salvini.

But this time it’s different. The politicians who have been shouting loudest about the European Union’s botched response to Covid-19 would be hard to paint as Eurosceptics. Giuseppe Conte may have become Italy’s prime minister in 2018 as the face of the anti-establishment Five Star Movement, but he has since refashioned himself as Europe’s steady hand in the south. ‘It is within the perimeter of the EU and not outside that we must seek the well-being of Italians,’ he told parliament on winning its confidence to form a second government last year. The Spanish prime minister, Pedro Sánchez, had been a dutiful pro-European since assuming office ten months ago, promising to ‘guarantee budgetary and macroeconomic stability’ and to respect Europe’s fiscal objectives. Now he is openly questioning the survival of the EU if it cannot deliver a joint fiscal response to the Covid-19 threat. ‘We must act now or never,’ he said, ‘because, right at this moment, Europe itself is at stake.’

Of course, the proposal for a coronabond can be crushed too, and probably will be. At the fractious meeting of the Eurogroup last week, finance ministers agreed only to develop ‘innovative instruments, consistent with EU treaties’ in order to fund the Eurozone’s economic recovery. To the Italian finance minister, Roberto Gualtieri, the agreement means that coronabonds are ‘still on the table’. To the Dutch finance minister, Wopke Hoekstra, it means nothing of the sort. Shortly after the meeting he said he ‘wasn’t OK’ with coronabonds. ‘I was never OK with it and I never will be.’ And so the can gets kicked down the road. ‘Now it’s up to the leaders to take the right decisions,’ Gualtieri said, looking ahead to the European Council meeting on 25 April, when the presidents and prime ministers of the EU will gather to discuss the Eurogroup’s proposals.

The most probable outcome of those negotiations will be a ‘Merkel fudge’, by which the German chancellor presents a minor concession as a magnanimous gesture. Merkel’s government is now proposing a laundry list of smaller-scale financial interventions to demonstrate support for Europe’s abandoned children – an unspoken ‘everything but coronabonds’ approach. It will probably be enough to appease the restless governments in Rome and Madrid, who will throw their hands up and say they tried. Rumour has it that the finance ministers erupted in applause at the end of the Eurogroup meeting last week, celebrating an agreement that will do nothing to prevent the crisis from deeping the chasm between Europe’s north and south.

The problem with papering over Europe’s economic wounds, however, is that the old ones haven’t healed. In 2012, a Merkel fudge compelled Greece to accept brutal austerity conditions and staved off the collapse of the Eurozone. Germany always relied on a tacit ‘good cop, bad cop’ routine with the Netherlands, whose obsessive frugalism made fiscal extremists in Germany look like humanitarians. But the recovery measures they introduced in the last crisis barely staunched the bleeding: by 2019, youth unemployment in Italy, Spain and Greece was still more than 30 per cent. Covid-19 has ripped off the plaster to reveal the carnage underneath. If Europe opts for another Merkel fudge, and Conte and Sánchez go along with it, then Salvini, Le Pen and their friends need only point at the wound and state the facts.

‘Crises’ have often had a hygienic function for the elites that preside over them, offering opportunities for leaders to consolidate their support as people see for themselves that things could be so much worse. Many 20th-century revolutionaries became stabilisers of the systems they had set out to bury. After the Second World War, communists in Italy and France set themselves up as the custodians of reconstruction, helping their old states modernise after fascism.

The sorry conclusion to Europe’s decade of austerity, however, is just how little creativity it has inspired in its elites. Defenders of the European project are not in short supply. ‘The EU bears a global responsibility to the human race,’ a group of academic petitioners noted last week, and ‘can successfully step in and pave the road for the management of this unprecedented health crisis and its social and economic consequences.’ But little of their ambition reaches the citadel of the Eurogroup. The finance ministers have learned nothing and forgotten nothing.

‘I don’t trust loans coming from the EU,’ Salvini said recently. ‘I don’t want to ask for money from loan sharks in Berlin or Brussels … Italy has given and continues to give billions of euros each year to the EU and it deserves all the necessary support, but not through perverse mechanisms that would mortgage the country’s future.’ It’s a reasonable point. And Salvini’s sounding reasonable ought to worry anyone concerned about the stability of the EU.

In his commentary on the 1830s British Factory Acts, Marx suggested that employers supported the reforms because of their own worries about the ‘destruction of labour in the “satanic mills” of their factories’. Malnourishment hurt British productivity. Child labourers were less effective than able-bodied men. And yet, as Wolfgang Streeck has written, the employers ‘could not act on what they knew should have been their rational interest.’ It took mass agitation to make them see it.

As captives of an aggressive short-termism, EU elites lack an external threat to stabilise their mode of rule. They see too little opportunity in crises. History does not impose reason on them. As with the Factory Acts, it would require mass pressure from below to make the EU just a little bit more rational (assuming it survived that pressure). But with citizens shut in at home and strikes banned from the streets, such a mobilisation has begun to seem like an anachronism. In the EU, elite rationality may have to wait on a new form of popular irrationality to take hold.


  • 17 April 2020 at 1:03pm
    Graucho says:
    Dear Gordon Brown,

    Thank you, thank you, thank you, for keeping us out of the Euro. Shame you trusted the city,


    • 19 April 2020 at 1:27pm
      James Wallace says: @ Graucho
      And which of the two currencies has fallen furthest in the years since?

  • 18 April 2020 at 7:51pm
    Simon Matthews says:
    EU decisions tend to arrive after a position has evolved: not sure we are at the end of the road, yet, on this one. They also require (in most cases) unanimity. Hence the impasse on April 18th. My guess is that the Dutch position - which I agree should have been expressed in more sensitive language - is to do with seeing off the execrable Geert Wilders in next years Dutch elections. By the way: the EU is doing something. (And a pretty big something, at that). What are the Brits doing to their own economy?