Please find here the video recording of our second United Europe Websalon “United or divided – Europe’s historic Test of Relevance and Solidarity”, which took place on Monday, 18th May.
On the panel:
Sabine Lautenschläger, former member of the Executive Board of the ECB, former Vice-Chair of the Single Supervisory Mechanism of the ECB
Enrico Letta, former Italian Prime Minister, Dean of the Paris School of International Affairs (PSIA) at Sciences Po
Gordan Grlić Radman, Foreign Minister of the Republic of Croatia
Alexander Stubb, former Finnish Prime Minister, Director School of Transnational Governance (STG) at EUI
Moderation: Ali Aslan, TV Presenter & Journalist
Key Sentences:
Sabine Lautenschläger
The population of Germany’s in general are quite satisfied with the reaction the government showed. About 66 percent of the German population is satisfied with the way how the government dealt with the crisis.
The latest decision of the German Constitutional Court doesn’t hinder the ECB with regard to its mandate of price stability and the consequences of the coronavirus and its ECB action with regard to these consequences.
The court decided about the normal quantitative easing which said that the ECB should have talked and described much more how they assessed, according to the proportionality principle, the different interests between the monetary policy task and consequences, direct or indirect consequences, to fiscal and economic policy, which is not within the mandate of the ECB. They are not forbidden to do anything now by the German Constitutional Court, but it’s rather that they are asked to explain whether this kind of overall assessment, according to the principle of proportionality, has been done during the discussions and the preparation of the quantitative easing program.
There is the possibility for the ECB as well as for the Bundesbank to explain more whether the measures taken by the Eurosystem is qualified to meet the mandate of price stability, whether these are the mildest measures taken and whether they are proportional in a certain sense with weighing the different interests.
When you prepare for a monetary policy decision, then you take into account all the economic factors which have an influence on your part of the mandate in the monetary price stability.
The court ruling has three consequences: 1. how much has the ECB or the Bundesbank to deal with this proportionality principle and the question of how to explain it better. 2. there is a certain tension between the German Constitutional Court and the European Court of Justice which is something that needs to be solved by certain kinds of policy principles around it. 3. If you ask national governments to put pressure on the ECB or the Eurosystem or the national central banks in order to do certain discussions, explanations, etcetera, according to a principle, you have to ask yourself how does this fit with the independence of a central bank.
We can see from the history that each crisis brought more or less progress in the European integration process. When you look at the crises 2008, 2009, afterward the banking union was created. Each crisis is a test for sure, but it is an opportunity, too.
The reaction time of the EU has been much quicker this time than it has been the last time. It might be that we still have a communication issue. But when you look at the reaction of the different EU institutions, as well as the discussion and coordination, which has then been done by the different national governments together with the EU Commission, I think we already made a step forward. But we have to make some proposals to move even further in order to support the European integration process.
This kind of crisis is a global one, we are all hit. We cannot solve it on the national level. Even the European level is too small. But as we know that we cannot have full coordination on a global level, we should at least get it done on a European level.
The ECB as such has only amended for price stability. It cannot do policies with regard to social, economic or fiscal aspects. Nevertheless, and that’s what the court more or less said, the measures were taken because of monetary policy, the measures taken by the ECB, they do have consequences on the economic situation of all the EU area and member states. But they are more or less indirect consequences which are for example, a change in prices, etcetera, which are all linked to the goal to get price stability. The national governments have to do their part with regard to the economic, social, and fiscal policy.
I recommend measures which are taken unanimously, which are able to be applied very quickly because we cannot afford a one-year struggle with legal or political issues. For me, it’s much more important to have a joint understanding of the member states’ governments to put in a basket of money together in order to ensure that European projects can be supported.
I sometimes worry about the expectations of everybody, that every government and the EU Commission and all of the European institutions need to know optimal solutions in the first minute after a crisis which has never happened before in such a way. So from my perspective, I think that we are on a good way, that we did not do everything optimally. But hopefully we will use this test and this crisis as an opportunity to move forward with the European integration.
Enrico Letta
After two and a half months of lockdown we have costs of more than 100 billion euros for the country. We need to restart now. The summer season with tourists is one of the big question marks. A good comprehensive European response is very important.
This crisis is the third one in a row in Italy. We had the financial crisis, and most important for Italy in terms of raised euro skepticism was the refugee crisis. In these two crises, the feeling that Europe was something far away, that more Germans and French and the northern countries were leading the European Union and Italy were left alone, became very important. There is a large part of the opposition working and pushing on this frame.
It is a crucial moment for Europe because we need to show, first of all, a good narrative.
The recovery plan needs to give money to the people to show – to entrepreneurs, to the unemployed workers – that the European Union is able to help. Otherwise, you have what happened in Italy in the last months: One plane of Chinese masks and Chinese healthcare, one plane with Russian masks and Russian healthcare, causing a sort of triumphalist welcome by some part of the population.
At this very moment, we need more Europe in different fields, climate change, migration issues, on social issues, and many more. I don’t see Germany in the same box, I see Germany on a different approach.
There are many worries about the way in which Southern countries are not able to spend money and about the debts in Southern countries. The key issue is joint forces because we are stronger together and should manage solutions together.
My biggest fear is that the consequences of the lockdown and the fact that Italy has a very high debt will create a lot of problems in the markets.
The history of the Italian debt is a history in which we had two holes: one in the 1980th when the debt moved from 40% to 120%. The debt today is 135% and it was 125% when we entered the single currency. We had a second black hole during the financial crisis. In six years, the Italian debt moved from 103 to 130. And that was because of the lack of growth. We had two dramatic moments, but it was because of the crisis and not because of the mismanagement of the debt. Now we are facing a third external threat that will push the debt again. This is why I think common European solutions are positive. We need common solutions to tackle the crisis. We are not asking for donations. We are asking for European solutions.
In reality, the European Union is helping Italy. The ECB is working in a fantastic way to Italy. But the perception is not there. We need the correct narrative. Otherwise, I think the idea of a generous northern part of Europe will prevail and that would be a great problem for the future.
I don’t see Italexit as a possible scenario. Italy is not the UK. The UK was partially out from many of the European integration policies. Italy is too integrated that I don’t see Italexit as an issue. Even the populist leaders, who are blackmailing Europe with the idea that Italy is too big to fail so you have to help, are not preparing another scenario.
The rise of Euroscepticism and the entire euro sentiment is a problem. It depends on the response of the Europeans in the next period, it depends on the way in which we will communicate it. But I’m sure that the evidence will raise. For instance, I continue to say everywhere that for the first time in 70 years, the European Union, European integration has a concrete outcome, a very important social package. That was not the case in the past because of the UK veto. But with the plan SURE and with the ESM for the first time we have a social European policy. This crisis is a way of showing that there’s a step and we are moving in the right direction.
We need to have a stronger European Union, a more balanced European Union. Until now, European institutions, ECB, European Commission, even the European Parliament is still open and well-functioning were very good at the performances. Member states and cooperation among them were very bad. This demonstrates that when you give the power to someone to represent all European citizens and European interests, they are very good at doing their job.
The conference of the future of the European Union will be decisive to have a closer relationship between citizens and European institutions.
We need planes with the flag of the European Union able who send for example sanitary masks, to be able to show the people what the European Union is really doing.
It is very important to use a language of truth. European leaders responded to the crisis in a better way in comparison with some leaders of the rest of the world. Because of our populists, they have their gods and one of them is Trump, another one is Bolsonaro, and their way to manage the crisis was horrible.
One key issue is to be able to change something important in the conference on the future of Europe. Otherwise, we will continue with a Europe of the European Council, Europe of member states, without the possibility to understand that. I repeat: One Prime Minister has his own constituency and he can’t be the leader of Europe. You need to give legitimacy to the leader of European institutions.
We took lessons from all the crisis’s but the refugee crisis. If we don’t have a comprehensive and ambitious migration policy at a European level and not just all the member states fighting against each other, that doesn’t work.
Gordan Grlić Radman
Croatia currently holds the EU Presidency and we are proud to be part of this family since we joined the EU 7 years ago.
Although our Presidencyʼs slogan is “A strong Europe in a world of challenges”, no one expected to challenge of the pandemic. However, we showed determination and flexibility and we succeeded to organize work in the Council, i.a. by organizing more than 30 ministerial videoconferences. We were dedicated to these four priorities: a Europe that develops, a Europe that connects, a Europe that protects, and an influential Europe, also in these specific circumstances. In a European Union, we should not have unilateral approach as we must show solidarity and act together. The Coronavirus was really a proof of solidarity and coordination within the EU and confirmed again credo from previous crises that “United we stand, divided we fall”.
Many EU member states have adopted extraordinary measures in coping with the crisis. The European Union stands for European values. We have of course different histories and different cultures, but common European values are the cornerstone of the EU.
The Western Balkans is also part of Europe and we should not neglect its European perspective. We held a virtual Zagreb Summit on 6th of May with leaders of the EU and the Western Balkans. We adopted the Zagreb Declaration that reaffirmed and consolidated the European future of the Western Balkans. Additionally, Croatia helped Bosnia- Herzegovina, Montenegro and Albania by donating protective medical equipment. This solidarity has proven that European values are something we should strive for.
On 9th May we marked the 70th anniversary of the Schuman declaration, its must most important word was solidarity. And now, after 70 years, we can witness that solidarity is the main word in the European Union. The pandemic is putting our societies under serious pressure. It has also become increasingly clear that the well-being of each EU member state and its citizens depend on the well-being of the whole European Union. The recovery of EU economies strongly depends on the functioning of the single market and the free movement of people. The restrictive measures have been necessary to slow down the spread of the virus, but they come at high social and economic costs.
There is no alternative to the EU from the Croatian point of view. Croatian Presidency shall work further towards better coordination of national and EU measures in dealing with the consequences of the crisis and will support the recovery.
Alexander Stubb
There has been a different approach between Finland and Sweden. We went for the semi locked out; Sweden went for the completely open. If you look at the relative figures of the death toll, they’re about 10 times bigger in Sweden. But I still think that the jury is out and not, who did the right thing and who did the wrong thing. We simply don’t know.
I think what happened at the beginning of the crisis was a tremendous miscommunication. And if this was a propaganda war, I would argue that the Chinese and the Russians wanted hands down. One plane of masks from Russia, one plane of masks from China, and suddenly you could hear the Chinese national anthem being played on balconies in the evening in Italy.
The big problem is communication: Everything that is bad comes from Brussels, everything that is good is thanks to me. There’s an inbuilt problem with European communication. There’s not one European leader that goes back and says: Thank you, Brussels, for what you did, thank you what we did together. They are saying: Look what I got out of Brussels. Therefore, we are in a catch-22 situation. We’re probably not going to get the communication right.
I think the dilemma was probably more serious during the financial crisis that started in 2008 and probably to a certain extent in the asylum crisis. But there is one thing that we always have to keep in mind in these types of crises: they’re all very different. We human beings have a tendency to over rationalize the past, overdramatize the present and underestimate the future. And I think that is what we are doing here a little bit.
Categorizing member states to north and south in this particular crisis is simplifying too much. Everyone understands that this pandemic is symmetrical. It hits all of us equally. Italy got extremely unlucky because it got hit first. And the sense of solidarity that I can feel for Italy around Europe is very palpable. But what happens is that it does hit our economies asymmetrically. And when that happens, solidarity needs to kick in. And that’s why we need to use every instrument in the bag at the moment.
I would not be excessively worried about the debt levels. The only problem that we have is that in the long run, we will have to pay this back. And the vicious cycle that we are in the moment is that when there is no production when there is no consumption, there is no tax income when there is no taxable income and there are still many public expenses to be paid, governments will have to take more debt.
I agree that we will come out of this stronger, much like we came out stronger after the end of the Cold War, after 9/11, and after the financial crisis 2008. I do have one recommendation, however, and that is that we should stop looking at the European Union as some kind of a utopia, an ideal society that always comes up with perfect solutions. My simple thesis is that the EU always goes through three phases. Phase No 1 is crisis. Phase No 2 is chaos, that’s where we are now. And phase number three is a suboptimal solution. It’s never going to be a perfect solution. It’s always going to be suboptimal. And we’re going to have to start living with that.
Never underestimate the resilience of European welfare states. I’m in the process of writing a book about digital democracies and digital dictatorships. And I’m comparing three major powers in the world, China, the United States and Europe. And my basic argument that put it in simple terms: It’s all about welfare. When you come out of a crisis like this, if you do not have a strong welfare state or the capacity to give support of those who have been left stranded, then I think you’re going to be in deep trouble. That’s why I would argue that Europe will actually come out of this crisis stronger than China and certainly stronger than the United States.
The biggest worry I have as a pro-American transatlanticist is that the American institutions are not going to be able to cope with this crisis. When you have unemployment rates going from four percent to 16 percent, and that are in the real-world 25 percent, you need a pretty agile economy to make a comeback. If you don’t have a public health care system, you need to start having someone who is paying the bill. So, the biggest worry I have is not Europe. The biggest worry I have is the United States.
The European Investment Bank has paid in capital of roughly 14 billion euros over 60 plus years. It has been leveraging that capital up to 250 billion euros, with assets up to 500 to 600 billion euros. This dept has been financed on the bond markets with 500 billion euros. If you wanted an example of the mutualisation of debt and mutualising risk, that’s it. That’s what the European Investment Bank is all about. European monetary history is littered with examples where we’ve actually mutualized debt. But the problem is with the language that we use about euro bonds or Corona bonds, et cetera. It’s a fallacy. For me, it just doesn’t make sense to have this debate at all.
Let that cash that’s coming out of the European financial framework, the budget, be clearly earmarked to European citizens. There are two ways to do that: One is loans and the other one is grants. And then we find a good balance between the two.
Reading Recommendation:
James Bindenagel: The Coronavirus Crisis Highlights Germany’s “Reluctant Leader” Problem
Anthony Gardner: Medium-term Impact of COVID-19 on the Future of the European Union