Please find here the recording of our online discussion on the Coronavirus crisis, Euro and Coronabonds, European Solidarity, and the European Single Market with:
Prof. Dr Ulrike Guérot, Political Scientist, Director European Democracy Lab, Professor for European Policy at Donau University Krems
Günther H. Oettinger, former EU Commissioner, President United Europe e.V.
Boris Ruge, Ambassador and Vice-Chairman, Munich Security Conference
Filippo Taddei, Associate Professor of International Economics, Johns Hopkins SAIS, Italy
Moderation: Ali Aslan, TV Presenter & Journalist
Key sentences of the debate
Günther H. Oettinger
In 2002 and 2003 there was a debate about healthcare and competencies. At that time members of the member states decided that healthcare mainly has to be a national responsibility. For the EU it’s just about moderation, about best practice, about networking.
We have to see now is this future proof or what has to be done after the Corona virus crisis.
Corona bonds are a difficult programme and not really acceptable to all of our member states. We never will reach a decision by unanimity.
We have to evaluate which instruments are most efficient for all member states. My expectation is that in May or June we can conclude a reliable and impressive instrument for all member states.
The Coronavirus crisis is not a Eurozone crisis. The financial crisis was a Eurozone crisis. Now we have a 27+ crisis and we need instruments for all member states, not just the Eurozone 19. We need instruments for our candidate members in the Western Balkan and partners in the Middle East and Africa. A solution could be a mix between loans, guarantees and bonds.
Budgetary responsibility means, the government is in the center of responsibility and so therefore, our annual budget provides the solution for a financial framework, which is most convincing for the other members. We have to convince Sweden, Finland, Austria, the Netherlands and Germany as well. The outcome has to be acceptable for hardliners such as Mark Rutte, Chancellor Kurz and some Germans. It is not only Spain and Italy who have problems, maybe Greece, Romania, and Croatia will have comparable problems after summer due to their reliance on tourism.
After a slow start, the EU has come around and has mobilized. The problem is that the challenges we face are so enormous. The decline in our economies, unemployment, critical developments in our neighbourhood – these are massive challenges that will test us to the limits.
We are looking at a crisis that is so significant and profound that we have to rethink views that have been held for many years. We must be open to and respectful of views of others.
Corona bonds are not something that is available short term. And what matters is making an impact in the short term. Resources have been mobilized via the European Council but also via the European Investment Bank. The European Central Bank has taken a significant series of measures. So I think where we’re on the way to something that is reasonable.
To engage in the conversation between Germans and Italians in particular strikes me as extremely important. We have different opinions and they will not disappear overnight. But we have to engage in a conversation that takes into account how desperate the situation of hundreds of millions of people across Europe is right now. And to come together.
It’s very important how we communicate with citizens across the European Union and with outside actors. I think we could do a lot better in that regard. I had an experience in 1999 when the German Foreign Office sent me to NATO headquarters in Brussels during the Kosovo air campaign, because it turned out that during that military operation, NATO simply didn’t have a communications apparatus that it needed in order to explain what it was doing. That was a real weak spot. There are some parallels to the current situation. Proper communication is extremely important and something we should pay attention to.
There are a lot of good examples of European cooperation and solidarity right now, many good things are happening. But they need to be communicated in an intelligent, competent, and modern way.
We have to be very clear about the limitations and the concerns of people who think that this is about too much globalization and that we can somehow retreat into a national shell and be safe there. We have to find a way of framing this broader debate and making the case.
Let’s not pretend that Corona bonds are the only solution out there. And on the German side, there’s also a need to open up (and the same on the Dutch and Finnish side) and to engage these questions that we’ve discussed today.
In his Financial Times interview Emmanuel Macron said a failure to move to a solution via Corona bonds will produce populism. I think it was Norbert Röttgen, Chairman of the Foreign Affairs Committee of the German Bundestag, who said, keep in mind that if we go for Corona bonds, we’re giving a lot of ammunition to populists in northern Europe. That’s part of reality, too. Die Alternative für Deutschland AFD would not hesitate to jump on it.
We see that in times of crisis the European Union cannot act. We have to have a discussion about the lead, about the European responsiveness, about the European institutional capacity to respond to this crisis.
We cannot boil it down only to economics. This is a cultural crisis in Europe. We already can see that those suffering most of the outcomes are women, less privileged communities and children. These are much more cultural and anthroposophical takes and it’s a little bit harmful if we only discuss the amount of economic risk and numbers.
In previous times, we had always a philosophy to communiterize after the crisis. This is how it all started in 1950 with coal and steel and we communitized coal and steel. Then we had a competition about currencies in the 70s. We did a common currency. This is why Corona bonds or euro bonds is so important because Europe lost the capacity to learn out of crisis and do something more communitarian together than before.
We need to discuss structural ways to communitize fiscal, social and budgetary policies. After all, what other crisis else needs to happen to make us move? What else needs to hit Europe?
Germany can lend in financial markets with 0.5%. Italy needs to lend at 2.5%. This is a structural, very important advantage for Germany and Austria and the Netherlands. And the real question is whether the privilege holders of the eurozone will go beyond that privilege and share privilege and allow for common lending, which would be hugely more symbolic than only saying we help with a tremendous amount of money. But we are not sending a symbolic signal that we are equal in this crisis.
I look at China and see how China is seizing the opportunity to basically eat itself into Europe. And that’s why I’m focusing on the symbolism. We saw Chinese and Russian doctors in Bergamo, but we didn’t see any German doctor, any Belgian doctor, any Swedish doctor and we didn’t see any European flag.
If we are reasoning about the future of Europe and about the affection of European citizens to the emotional and political project of Europe, we cannot cope with 50 % of Italians who are no longer interested in staying in the European Union.
I am very much concerned that there is a Chinese factor of geo-economy and the geo-strategy. When we come out of the crisis, countries like Serbia and the Czech Republic would be basically sucked into the Chinese socio-economic orbit and it will be very, very hard to strike against this. And China is now starting to also buy German companies. I think not only Europe is at stake, transatlantic alliance is at stake, there is a world order at stake and we are seeing dramatic geo-strategic shifts under the umbrella of Corona.
It’s right that Mr. Oettinger said that giving Corona bonds is a program for AFD. But not giving Corona bonds plays into Salvini’s hands in Italy. This is reciprocal.
We need a European state. In 2003, when we engaged in the European Constitution, there were lots of books already written about it, shall we do a European state, fiscal federalism? I wish we could go back to the 2003 documents. Put them out of the shelves and give it a second try.
In a democracy, citizens are equal. And so they must be equal in terms of taxation and social access to public goods. If we frame a discourse about how to stabilize the currency, the single market for the European citizens and its public goods, we would have a reframing of the discussion that goes beyond nation state interest in the council.
Let us be really European citizens, and that means one thing equality in front of the law. We are equal. And if we are equal, we rethink the whole European system from the citizens in terms of equal access to minimum wage, equal access to unemployment schemes and so on. We have solved most of the fiscal and social problems of the global debt crisis.
For me the closure of the European border is the most unacceptable thing. I agree that we should have been security restrictions for hotspots, but that has nothing to do with the closure of borders in Europe and the quickness with which we have closed the borders. The closure of borders as a solution of the Corona crisis is to me the most cultural surprise. It strikes me that we have built up a 1970 years political project on open borders and were so quickly ready to close them.
The current shock is a combination of two shocks: one is immediate, in the present, a supply shock, i.e. a sudden contraction in our ability to produce; the second is in the future, it is a mixture of a confidence shock and a deeper question regarding what we will produce afterwards. This combination is a direct threat to the most important achievement, which is the European integration through the creation of a single market.
The single market has fostered integration, both economically and politically. Preserving the single market is the number one priority. The question is: how do we act differently in the most severely affected countries, like Italy or Spain, in comparison with the countries which are relatively less affected.
An Italian and Spanish crisis is not just an Italian and Spanish problem, it’s a European problem because it questions the survival of the single market. Thanks to the single market we have created value chains spreading across different countries. These chains tie our future together in ways that would have been unthinkable when we initiated the common market initiative.
In Bergamo we saw an unbelievable, heart-breaking and pathetic display of international cooperation undertaken by Russia. Every Italian watched on national television some military trucks with the Russian flag in the following day. But if you look at the actual numbers, the amount of aid that arrived in Italy from Germany alone was twice as much than we got from either Russia or China.
Therefore, we need to be careful with what we promise and we are able to deliver. Just an example: it’s self-defeating for our institutions to produce an official document at the end of the European Council meeting in which European leaders talk openly about the need for a new Marshall Plan. The Marshall Plan was a humongous intervention and we have to be very careful to use that wording, if we don’t plan to act accordingly. Otherwise, let’s not use that wording because otherwise we will just run the risk of facilitating euro-scepticism.
Let’s instead stop discussing issues that are not there, like Italexit. If Italy were to leave the Euro, we would end up destroying France. France is so exposed to Italy in terms of public debt and private debt that we will put our different financial systems in jeopardy. I wonder: is it likely to let this happen and then be in a position in which the German taxpayers have to bail out the French financial system? I think this would be most problematic, to use the understatement of the century.
Let’s instead address the issues that are most pressing: the liquidity shock that we’re facing right now is without precedents. If you take, for instance, the Italian economy you will find that, at the present time, it works at 40% – 30% less of its capacity. There are a lot of Italian companies out there where revenues went down to zero.
You can keep on framing the issue of a valid response as “let’s expand this or that European program”, which is a little bit of the German way. The logical consequence is that we end up focusing on what is the appropriate increase in the contribution to the future European budget. It’s all useful but falls short of the objective, I am afraid. Think about the size of each countries contribution, how much we would need to increase the size of the European budget to come to a sizable response appropriate at a European level. The answer is: it’s too much money. It is untenable. We are talking about a very large amount of resources. If you keep on framing it as a matter of “let’s give more money” to solve the problem, you’re all adopting the rhetorical perspective of populist and you will pay a big political price in Europe, in Northern and Southern Europe alike. We have to discuss how we deal with the consequences of the pandemic.
Italian debt will reach 160 % of GDP. France will be well above 110 and Spain will be 130. German debt will be around 80 % of GDP. This is a mass of debt out very hard to manage in the absence of fiscal coordination and a strong recovery. What will be the end game of this process if we fail to act? We have already seen it in 2011 when the financial crisis triggered a sovereign debt crisis. Then, little by little, the ECB became the only game in town.
Think about what this will mean for German and northern voters in general in the aftermath of the crisis: unloading on the lap of the ECB all this massive amount of debt will put the ECB with its shoulders against the wall, forced to be the only institution intervening to stabilize the European economy and financial markets. This will make it increasingly more difficult for the ECB to take care of what its mandate determines, which is stable prices. We have to explain this trade-off to Europeans: lack of fiscal coordination risks pushing the ECB out of its commitment to low inflation.