Thu, Apr 23, 2020

Another test for Europe

Shaping the Post-COVID World Together by Mathew J. Burrows, Peter Engelke

Coronavirus Europe & Eurasia

EU flag flying under a cloud sky in Germany. Photo by Sara Kurfeß on Unsplash

A lack of multilateral and bilateral European solidarity—the third time within the last decade (migration, the eurozone crisis, and now COVID-19)—could be the catalyst for further erosion of the EU.

But crises have historically propelled the EU to greater heights of integration.

The coronavirus has affected the Mediterranean South: Italy and Spain, for example, have complained about lack of support from Brussels. However, we have seen the European Commission show flexibility on deficit spending. The European Central Bank (ECB) is promising to do “what it takes” to protect the euro and help with the recovery of individual member states.

US global leadership at risk

This article is part of a series examining the ways that US global leadership could be threatened in a post-COVID-19 world. Click below to read the main entry in the series.

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Stimulus measures by national governments equal to approximately 2 percent of GDP, though, are still modest compared to the United States’ whopping $2.2 trillion package amounting to some 13 percent of the US GDP. The ECB’s large-scale government bond buying program plus the recent Eurogroup 540 billion euro package is an excellent start, but more financial help for rich and poor countries will be needed. 

The more ambitious plan that nine EU member states are backing is for “coronabonds” or a limited duration Eurobond that would ensure shared risk and lower borrowing costs for Italy, Spain, and other countries affected. It would help preserve solidarity among EU members.

Without more unity and solidarity, there is a danger that those European countries that are already bending towards China (Eastern European countries, Serbia, Greece, Italy) could do so even more after the crisis. 

Europe cannot do it alone

The chances of Europe alone saving the multilateralist framework for international relations are slim without help from the United States and acquiescence from China.

An early and strong US recovery, combined with a change in leadership in Washington, could see the two sides of the Atlantic relaunch an effort to refurbish and reform international institutions such as the World Trade Organization (WTO), the World Health Organization (WHO), Bretton Woods institutions, and others.

But it will require the United States and the EU taking more responsibility for the developing world’s predicaments, countering China’s Belt and Road Initiative.

A broader US and European coming together against China would also be needed to make it work and avert an East-West competition in which just like during the Cold War the developing world would not necessarily be a winner.

See where US leadership is most vulnerable

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