“The Covid-19 crisis will make or break the eurozone,” an open letter signed by over 400 economists, said last week.
The letter continued, “No member state should have to seek a bailout or sign a memorandum of understanding to access emergency EU funding.”
The group of economists that includes Thomas Piketty and Aidan Regan is advocating a collective response to tackle the economic crisis that the global pandemic has given rise to. “This is a European crisis, it requires a European solution,” they said.
This collective response would come in the form of a so-called “eurobond”. Rather than individual member-states issuing their own debt to fund their economic response to the crisis, a “eurobond” would be a joint debt instrument that all member countries would guarantee.
The idea is controversial and has divided member states.
Nine countries including France, Spain, Italy and Portugal have backed the idea but Germany and the Netherlands have rejected it.
The policy is a radical step so it is understandable that there is some disagreement but the nature of the disagreement is illustrative of deeper divisions at the heart of the eurozone that may threaten its future. The crisis has reopened wounds still raw from the financial crisis a decade ago.
Last week, Dutch Finance Minister Wopke Hoekstra reportedly called for Brussels to investigate why some countries did not have enough financial room for maneuver to weather the economic impact of the pandemic.
This at a time when the whole continent is reeling as a result of the Covid-19. Also, the members who would fall under this “investigation” would be states like Spain and Italy who have been hardest hit by the virus.
Latest figures show that over 10,000 people have died in Italy as a result of Covid-19, the most of any country in the world while over 5,000 have died in Spain.
Portuguese Prime Minister António Costa reacted furiously to Hoekstra’s comments. “That statement is repugnant in the framework of the European Union,” Costa said. “No one has any more time to hear Dutch finance ministers as we heard in 2008, 2009, 2010 and so forth,” he continued.
This is just the latest example of long running tensions between countries in the south, Portugal, Spain and Italy and those in the north like the Netherlands and Germany.
“The last thing a responsible politician can do when we see the dramas in Italy, Spain and in all the other countries, is to not understand that the priority of priorities is to fight this virus,” Costa said.
The EU is in a precarious position as it faces the reality of Brexit, growing euroscepticism as well as the ongoing health crisis and a future financial one. The last thing needed is infighting and finger-pointing at such a critical time.
“Either the EU does what needs to be done or it will end,” Costa warned.
Now is time for solidarity with the member states most deeply effected by the pandemic. The EU must listen to those states and take take bold action.