EU leaders must refocus after miserable January

A common cliche in soccer is that matches are a game of two halves, with a team’s luck liable to change dramatically in a short space of time. This perfectly sums up the EU’s experiences in recent weeks, with a traumatic January following a historic December.

Prior to the new year, the bloc was riding high — after a troubled 2020 — thanks to stellar foreign policy deals, including the EU-UK post-Brexit trade agreement and China investment partnership breakthrough. However, the turn of the year has seen problem after problem for the EU27 due to the coronavirus crisis.

Not only has it engaged in controversial vaccine diplomacy, as last week’s spats with nations from Australia to the UK highlight. Moreover, its own rollout of coronavirus jabs has been criticized for its comparative slowness, especially compared to the post-Brexit UK, in part because of supply challenges from leading manufacturers.

But it is not just the healthcare dimension of policy where the EU is struggling with the pandemic. It is also proving a laggard with the disbursement of the €750 billion ($900 billion) stimulus plan that was agreed to much fanfare last year. Before any money from the fund is distributed, European capitals must publish details of how they plan to use the grants and loans by the end of April. The plans then require approval from the European Commission before cash can start to be distributed in the second half of the year.

French Finance Minister Bruno Le Maire said last week that the plan is too complicated and that acceleration is badly needed for pandemic-stricken regions and industries. Moreover, he argues that the delays highlight the need for a broader review of euro zone financial constraints to ensure the single currency bloc’s long-term survival.

Le Maire’s views were echoed by former German Finance Minister Wolfgang Schaeuble, who is now president of the Bundestag. He asserted that the EU has spent too much time wrangling over the size of the package and not devoted enough attention to thinking about spending it in areas such as artificial intelligence, digitization, and tackling climate change.

While Von der Leyen and some national leaders have been long on rhetoric, they have so far been too short on delivery

Andrew Hammond

These criticisms from France and Germany, traditionally the motors of European integration and strong supporters of the fund in principle, are as striking as they are politically significant.

The furor is a far cry from last summer’s euphoria when the fund was agreed. To much self-acclaim, European Commission President Ursula von der Leyen said: “This is Europe’s moment.” There was even talk about a “Hamiltonian breakthrough” for Brussels in reference to Alexander Hamilton, the treasury secretary for the newly created United States of America, who in 1790 convinced Congress of the benefits of a common debt.

However, while Von der Leyen and some national leaders have been long on rhetoric, they have so far been too short on delivery amid a pandemic that has shaken the continent to its foundations. The virus has exacerbated the bloc’s vulnerabilities, which — in the past decade — have been driven by the euro zone crisis, an influx of migrants, and growing euroskepticism, including Brexit. It has also intensified the political fault lines within the EU, intensifying long-standing splits. In particular, divisions have grown between southern states such as Spain and Italy, which have been hit hardest by the health and economic crisis, and northern nations like the Netherlands, Finland, Denmark and Austria, which tend to be more fiscally conservative.

Despite these schisms, it is vital for the continent to come together in the face of its worst economic shock for decades. As ever, it will be France and Germany that are most likely to forge a consensus between the competing interests. It is important they succeed in driving the bloc’s economic recovery, while also enhancing social solidarity given that support for Brussels in some southern nations has plummeted due to the perceived lack of help from EU partners at the beginning of the crisis. Von der Leyen has already apologized for this.

With the coronavirus crisis still badly impacting the continent — Europe and North America were last week home to nearly two-thirds of new global recorded cases — now is the time for the EU’s politicians to step up. The recovery fund still has the potential to be a milestone in the postwar history of European integration, given the prospect of mutualized debt being used as a funding tool for the first time, possibly paving the way for greater EU supranational powers of taxation.

What is now needed is for the continent’s governments to drive through the program faster, as Le Maire and Schaeuble argue, and come together amid the continued divisions. At this crossroads, now is the time for European leaders not just to talk the talk, but also to walk the walk by fortifying the union post-Brexit and fostering its post-pandemic economic recovery.

• Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.