Limits of EU Solidarity: Merkel and Conte Clash Over Covid-19 Measures

Covid-19’s impact reaches far beyond just its devastating physical health implications. Most notably, the ever-verbose EU has become a union in name only, silent and obsolete. Its virtues, freedom of movement, open borders, and cooperation are currently in free-fall. Amid the coronavirus crisis, Europe has witnessed a resurgence of nation-states that are self-focused and in survival-mode as opposed to being concerned with the greater good of the continent.

Coronavirus is Showing the Limits of EU Solidarity

It might be a first indication of how Covid-19 could alter the European Union moving forward as the heads of government are in an open dispute about the economic measures to overcome the crisis – and this is only the beginning.

The southern Europeans, Italy, France, and Spain are calling for joint borrowing: so-called Eurobonds to mitigate the economic impacts caused by the pandemic. German Chancellor Angela Merkel, Austrian Chancellor Sebastian Kurz, and the Dutch leader Mark Rutte are rejecting the idea.

This rejection is an enormous affront for Italy’s Prime Minister Conte, who urgently needs the tools to overcome the recession that is emerging on Italy’s horizon. Merkel’s laboriousness and deliberative nature — a trait the German Chancellor has long been (in)famous for — has frustrated Conte, who urged the other leaders that the consequences of the Covid-19 needed not to be addressed in the subsequent months, but “tomorrow morning.”

Prioritizing National Self-Interest

Those who have paid close attention to European — and indeed global politics — over the previous decade might rightfully wonder whether Germany has all of a sudden lost its ability to bring Europe together. The answer is no, it has not. However, Merkel, Kurz, and Rutte, just like any other leaders, have shifted their focus away from the common good and onto their own interests.

The argument over Eurobonds revolves around the fact that governmentss would have to increase the taxpayers’ burden in Germany, Austria, and the Netherlands. Conservative figures for Germany are estimated at between €20 to €30 billion.

Italy, France, and Spain, on the other hand, seek to secure funds on the capital markets via Eurobonds and be jointly liable for their debts, which, in turn, would largely protect them from the pressure of the market. Moreover, sharing debts would reduce interest rates for economically troubled nations such as Portugal and Greece. However, nations with excellent credit ratings such as Germany or the Netherlands would have to pay increased interests on the debts raised – a concept they are not inclined to accept, particularly as no one can currently project how hard the corona impact on the respective economies will be.

EU Parliament President Disappointed

EU Parliament President David Sassoli was disappointed that no consent could be realized yesterday. He had expected a sense of “greater responsibility,” as some governments had displayed “nearsightedness” and “selfishness.”

Sassoli’s criticism, however, is misleading as Germany is inclined to help in the right circumstances. It is only that the approach of how the help is being facilitated differs from the specific demands. Merkel did propose aid in the form of the ESM rescue fund, which would provide for extended credit lines. In theory, the ESM offers credit guarantees if a country has difficulty refinancing on the capital markets. According to Merkel’s plan, each country ought to have access to sums of two percent of its economic output – a total of €240 billion. However — unlike Eurobonds — any ESM aid is linked to conditions that result in budget consolidation and some supervision over the domestic fiscal policy.

Conte rejects Merkel’s idea. So much so that he prevented including Merkel’s proposal in the session’s final communique. With no solution reached, the Eurogroup under President Mário Centeno is now tasked to develop a new plan within two weeks.

The situation is very complicated. Moreover, the current developments display perhaps more plainly than ever that in times of crisis, the old, noble EU rules, which call for nearly unconditional solidarity, could soon cease to exist since European states are currently scrambling to uphold their respective economies more than preserve the union.