European Commission President Ursula von der Leyen speaks during a plenary session of the European Parliament in Brussels on May 27, 2020, amid the crisis linked with the Covid-19 pandemic caused by the novel coronavirus. (Photo by Kenzo TRIBOUILLARD / AFP) (Photo by KENZO TRIBOUILLARD/AFP via Getty Images)
European Commission president Ursula von der Leyen is urging a transformation of the EU’s central finances © Kenzo Tribouillard/AFP/Getty

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The writer is a Senior Fellow at the Brookings Institution

An ever deeper Union versus a Europe of nation-states. European solidarity versus fiscal prudence. Joint profligacy versus national egotism. These were the battle lines pegged out last week by Germany and France’s proposal of a €500bn economic recovery fund consisting of outright grants financed by common borrowing on the one hand, and the loans-only counterproposal of the EU’s “Frugal Four” (Austria, Denmark, the Netherlands, and Sweden) on the other.

And that was before the European Commission waded in on Wednesday with a €750bn package consisting of grants, loans and guarantees, to be partially financed by EU taxes — an idea that has been rejected before by member states. It’s a safe bet that things could get pretty nasty before a classic fudge is hashed out at the last moment.

It helps to step back and reflect on what is at stake here. The Covid-19 pandemic, the worst disaster to hit humanity since the second world war, is far from over. But it has already shone a brutal spotlight on the state of the world. The US, China and Russia are not having a good crisis. All three great powers will come out of it with less influence and less respect, but that will probably only increase their rivalries and appetite for confrontation.

The less-developed world faces a humanitarian emergency that could lead to resource wars and new mass migration movements. International rules and institutions are fraying, but economies remain interdependent — raising what political economist Nicholas Eberstadt calls “the awful dilemma of global integration without solidarity”.

The European project, whose emphasis on shared sovereignty and institutionalised collaboration itself evolved from past catastrophes, is uniquely at risk now because of its indefensible borders, lack of strategic resources and dependence on globalisation. The Eurozone’s gross domestic product could plunge by up to 15 per cent this year.

Europe’s initial crisis reflexes, however, were shockingly selfish. The Commission was missing in action. Governments closed borders and banned exports of medical equipment. Politicians traded insults over coronabonds. The German constitutional court ruled that the European Central Bank’s bond-buying programme was out of bounds. An Italian survey showed that 67 per cent of respondents believed they were better off without the Union.

Yet this is also a clarifying moment. There is no return ticket to an imaginary sunlit past of loosely connected European nations. The past months have revealed remarkable resilience and public trust in countries that had been struggling, like Greece. But they have also shown up some of the egregious mistakes of Europe’s most wealthy and sophisticated societies, such as the UK and Sweden. The pandemic is also a crisis of the modern nation-state.

There is only one way forward: to work with, not against each other. For half a century, deeper integration promoted peace, prosperity and democracy in Europe. More recently, the eurozone crisis, the refugee emergency and bullying by China, Russia, and President Donald Trump’s US proved that European states are protected and strong only together and weak when divided. In today’s darkened geopolitical environment, real freedom of action is only to be had for Europe acting as a whole.

A key unresolved question remains. How much more Europe is necessary to rescue the achievements of the past and achieve strategic freedom of action? Handing competences to Brussels helps institutionalise and depoliticise difficult policy questions, creating transparency and predictability. Conversely, resolving thorny issues between governments maintains decision-making power where there is greatest democratic accountability. It also sucks up inordinate amounts of diplomatic energy.

But in the current moment of crisis, what matters far more is that chancellor Angela Merkel, in a historic shift, is throwing Germany’s full weight behind European recovery, backstopped by a potential contribution of €135bn. In doing so, Berlin is responding to the German constitutional court’s most powerful point: that existential decisions on Europe’s future should not be made by judges and central bankers, but by elected governments.

The Frugal Four might also want to keep in mind that the Franco-German proposal is a one-off. It only becomes a “Hamiltonian moment” — a step towards deeper EU integration — if all the member states together decide that it should be so. For now, it sends a crucial signal to the world that in Europe, integration and solidarity go together.


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