Lessons from Coronavirus: Pay more attention to the EU
We live there. Third in a five part series.
“We will become all one thing or all another.”
- Abraham Lincoln, 1958
Prologue
We here in Ireland have had a strange relationship with the EU. Ten years ago, the defining event in that relationship was the ECB’s threat to cut off financial support to Ireland if we didn’t incur tens of billions of euro in debt bailing out our toxic banks. This event was itself just one episode in the long saga of the Eurozone crisis during which small countries were repeatedly forced to shrink their economies for the sake of investors in neighbouring countries. The euro threatened to collapse, and the utopian European ideal of international co-operation came to seem like a pretext for the domination of the weak by the strong. You don’t hear about this much anymore, but as recently as 2015 there were serious fears that the EU might disintegrate if Greece finally did what no other small country dared and left to preserve its own self-respect. The portmanteau coined to describe this prospective secession was “Grexit.”
Of course, when the EU finally did face its moment of existential threat, it came not from the working classes being led by Marxist intellectuals against international capital but from a broad coalition of mostly white people being led by international capitalists against refugees and regulations. More bizarrely, the main obstacle faced by these other Eurosceptics on their quest for national sovereignty was Ireland itself. Brexit and the Irish border had transfigured Ireland from a symbol of beleaguered subordination at the hands of European overlords into a symbol of European unity and co-operation against the traitors to liberal democracy in perfidious Albion.
It must have been some relief to all involved when, one year ago last month, Britain formally left the EU. Not everyone was satisfied with the terms of the split, and there was still a trade deal to be negotiated, but the worst was clearly over. Newly secure in our position among our neighbours, the Irish could recover from our whiplash and calmly re-evaluate our European status during this new era of stability.
Lol.
The COVID-19 pandemic has been the ultimate stress test for the European Union: it’s a threat to the viability of open borders, an economic catastrophe, and an international crisis which demands multilateral collaboration. Perversely, the chaos of the moment could have been the perfect opportunity to evaluate the Union’s capacity to do what it’s designed to do. Indeed, the EU has been in the news a lot over the past year. Consider the following highlights reel of historic moments:
March - Countries throughout Europe close borders, first to Italy and then to each other, contravening the principle of free movement of people in the union
4th March - Germany bans the export of PPE to other European countries, contravening the principle of free movement of goods in the Union
18th March - The ECB commits to massive bond purchases to keep borrowing cheap for national governments, a move it neglected to make throughout the Eurozone crisis
20th March – suspension of fiscal rules imposed following the eurozone crisis to allow countries in the EU to incur high levels of debt -
26th March – Negotiations for a stimulus package for the EU economy come to nothing -
13th May – EU launches a plan to “reboot tourism” in the EU at a time when there are still 6,000 cases being reported every day (albeit down from 30,000 a month earlier)
June – EU commits to purchasing and distributing vaccines en bloc, rather than letting countries compete for supply individually
27th July – After three months of gruelling negotiations, a €750 billion recovery package is agreed
20th October – Recovery package is paid for by issuing hundreds of billions of euros worth of an entirely new kind of debt
9th December - Hungary and Poland nearly block the recovery package over a requirement in the deal to respect human rights law -
21st December – Commercial Marketing Authorization granted for Pfizer/BioNTech vaccine. 500,000 Britons have already been vaccinated by this point.
25th January - “EU threatens to block COVID vaccine exports amid AstraZeneca shortfall”
30th January – Hard border nearly imposed in Northern Ireland to prevent the entry of AstraZeneca vaccines into the UK.
As of today – Data shows that the EU has administered 7.21 doses of the vaccine for every 100 citizens, compared to 21.29 in America, 30.13 in the UK and 92.46 in Israel.
There is good news and bad news in here, but it’s all profoundly relevant to the future of our nation’s place in the world. For every headline listed above there is a corresponding set of questions about what the EU can and should be: How much can we expect rich and powerful states to temper their ambitions in the name of solidarity? How much can we expect weaker states to surrender their sovereignty in the name of unity? To what extent is all this co-ordination even worth the hassle? This is not the first time these questions have come up, and without Brexit to distract us anymore, the pressure to find conclusive answers is only going to grow.
And yet…
There is little indication of any imminent reckoning on this front. Let’s take the Irish Times Inside Politics podcast as a crude indicator of the centre of political attention in the nation. In the last year, only five episode titles have mentioned the EU, not including Brexit coverage. This might seem somewhat reasonable; Inside Politics is a national news programme, so prioritizing specifically Irish matters makes sense. After all, The Irish Times does also have a separate podcast dedicated to foreign affairs. But it’s not as if Inside Politics never concerns itself with matters abroad. In fact, there is one country which has been covered twice as much as the entire European Union, garnering eleven headlines to the EU’s five...
The Mirror of Erised
America is a Godsend for political junkies. No matter your interest or agenda, you can look to America and see whatever your heart desires. This is because the political system there is a) multifaceted, b) dysfunctional, c) polarized, and d) spectacular, so for any given argument you want to make, there will reliably be a U.S. media company willing to supply you with a black-and-white narrative to support that argument. Worried about racism? Look at George Floyd. Worried about black people? Look at the riots. Think we need a left wing revolution? Look at Bernie Sanders. Think the left has gone too far? Look at Bernie Sanders!
When EU officials looked into The Mirror of Erised last year, they saw a Western superpower so spectacularly incompetent that everyone would just assume the sober bureaucracy of the EU was doing fine by comparison. In 2020, America had more deaths from coronavirus than any other country in the world, in no small part because its leader was preoccupied first with running an ugly, divisive election campaign and then with attempting to overturn the results of that election. But times have changed, and without Trump as a foil, it’s becoming clear that a comparison with America is not so favourable to the EU as it once seemed.
Crisis Point
The EU currently suffers by comparison with America in three aspects of its pandemic preparedness: containment, vaccination, and economic resilience.
As late as September of last year it was obvious that the EU’s pandemic response had been superior to America’s. While last summer’s suppression efforts pushed the number of cases down to near zero in Europe, case numbers actually rose in America as underfunded state governments were forced to open up their economies. But when European case numbers quadrupled in October, Europe’s older age structure meant that our death rate rose above America’s for the first time in the course of the pandemic. Cases in Europe have been falling since January, but they’ve fallen faster in America, and unlike Europe, America has been rolling out vaccines at a remarkable pace.
Reporting on the EU’s disappointing vaccine rollout is ongoing, but insistence on securing vaccines at the lowest possible price is worth singling out as a source of delay. Since the EU negotiated its vaccine purchases as a block, it had enormous power as the vaccine companies’ number one customer. Unfortunately, using this power to drive down the price of vaccines proved to be a false economy; other purchasers willing to pay a premium wrapped up their negotiations sooner and are getting their vaccines first. When you’re buying a priceless commodity, the rational move is to let yourself get ripped off.
Even once the vaccine has been rolled out, Europe will still have an economic crisis to deal with. Many commentators, including this one, have been quick to remark on the shift in Europe’s approach to economic firefighting over the last ten years. The emergency measures taken in March and July were genuinely groundbreaking. But they weren’t enough. Again, comparison with America is illuminating. The U.S. Congress passed the $1.5 trillion CARES Act in March and gave it a $0.9 trillion booster in December. Now Biden is trying to get through another $1.9 trillion in relief, to be followed by another ~$2 trillion investment later in his presidency. That might be too much, but the EU’s $0.75 trillion from last July, most of which is coming in the form of loans rather than grants, is definitely not enough.
This is especially troubling given that Europe was much more vulnerable before the pandemic and has suffered a much bigger hit to its economy. The OECD estimates that GDP fell by twice as much in Europe as in America, and even more in the countries which were already struggling. Spend some time looking at the graph below to better understand the last twelve years of economic history. Look first at the 2008 recession. America got off the best, losing about two years of GDP and then promptly resuming its former growth trend. Germany was hit harder, but came back faster. Spain had a milder shock, but suffered under six years of gruelling austerity before beginning to recover. The real tragedy is Italy, which got the same initial shock as Germany, but which hasn’t caught a break since. Even before the pandemic, Italian GDP was lower than it had been in a decade. Now look at the shocks from coronavirus. The next Eurozone crisis is already here.
If our focus on America at the expense of Europe was ever justified by the relative disarray of the American system, that justification is beginning to ring hollow. Even in the most generous of interpretations, comparing Europe only to America represents the narcissism of small differences. Whenever we ask why we have done slightly better than America, we should also be asking why we’ve done so much worse than China. Furthermore, the democratic deficit in the EU makes it impossible for citizens to hold the relevant actors responsible for their failures. Who do you stop voting for when a bureaucrat makes a mistake? The EU needs a new vision for its own future, one which arrives with the support of its own citizens. Until we start acting as if our citizenship means something, no such vision will be forthcoming.
27 Brexits
It is worth taking a moment to consider a worst case scenario. Here is Adam Tooze in Social Europe, summarizing the ECB’s model of what might happen if EU financial support is withdrawn too soon:
Unemployment surges. The economy continues to contract into 2021. Credit falls off a cliff. As recession takes hold, loans turn bad and losses cascade through the financial system.
Europe’s banks, already in a weak position before the coronavirus shock, are caught napping. Their loss provisions in 2020 having been far lower than those made by their American counterparts, in 2021 they suffer a bloodbath. As their loan books deteriorate, weaker banks—above all in Italy—are downgraded to junk status, tightening their access to bond markets, further restricting their ability to lend.
The failure to make good on the promise of 2012 to complete a banking union is exposed. Without credit the euro-area economy is paralysed. Unemployment surges by 2022 to 12 per cent.
It’s not hard to imagine the political consequences of another years long crisis like this. Europe during the Eurozone crisis was like a bad marriage, with everyone involved feeling resentful that they weren’t getting out what they were putting in. Such a marriage can survive if all parties see that meaningful progress is being made, but ten years is a long time to go without growth. Faced with such prospects, imagining the future becomes an exercise of existential importance.
There won’t be anything so simple as an in/out referendum which brings the Union to an end altogether – countries and their institutions are too enmeshed for such a clean break to occur. There is no self-destruct button for the EU. Much more likely is a grand reckoning. As the contradictions of the current paradigm are heightened, Europe will have to decide what kind of Union it wants to be.
In the best case scenario, a plethora of reforms will be suggested and the underlying principles thereof will be debated. We could, for example, abandon the euro, which would deliver flexibility at the expense of economic certainty. Or we could double down on centralisation, giving the European Parliament more power over the composition of the Commission and weakening the veto power of individual heads of state.
Realistically, though, the most likely outcomes are the least conclusive. If the past is any predictor of the future, we can expect a kind of muddling through which leaves no one satisfied and kicks the problem of self-identity further down the road. But we know now where that path takes us: further stagnation, further insecurity in the face of subsequent crises, even less political will to mold the EU into a system capable of justifying its own existence. There comes a point when nations stop asking themselves whether they should leave and start asking how they can possibly stay.
What next?
But the future is still in our hands. Pound for pound, Ireland is among the most powerful and the most Europhilic nations in the Union. We are more likely than average to say we feel like citizens of the EU and more likely to say we know what rights that citizenship gives us, but we are also more likely to say we want to learn more. This Europhilia is reflected in our clout on the continent. Two of the last eight secretary generals of the European Commission have been Irish. The chief executive of the European Medicines Agency is Irish, and so is the Chief economist of the ECB. Taken together with our aforementioned strategic advantages in a post-Brexit world, all this speaks to the potential for an engaged Irish citizenry to push for reform of the EU.
I am not well positioned to say what that reform should look like – this blog is being published four days late because I drastically underestimated the scale of my own ignorance on this topic. Anyway, no one blog post could ever do justice to such a complex system of institutions. I haven’t, for example, discussed the nuances of Ireland’s status as a quasi-tax haven within the EU. Nor have I considered the major international crises of climate and migration which will come to define international relations in the coming decades. But this complexity is exactly why the EU must become the subject of ongoing conversation in exactly the way that America already is. By that token, the most important part of this post will be the “Further Reading” section below. I realise this is the one-eyed leading the one-eyed to some extent, but if you've found this post to be in any way illuminating, then I promise you’ll learn much more by just going straight to my sources.
Alternatively, if you think I’m full of shit and that people should be directing their attention elsewhere, say so in the comments! Much like the EU itself, the discourse is at its most robust when it functions as a collaborative process. Long may it continue.
Further Reading
A good way to learn about any issue is to buy a free trial subscription to a good online newspaper and browse through the profile of the relevant correspondent on your issue of interest. Much of this essay has been informed by Naomi O’Leary’s coverage at The Irish Times, though she’s a little more optimistic than I am about the EU’s future
Social Europe is a great source for left of centre opinion on the EU.
In particular, the astonishingly prolific Adam Tooze is my go-to reference point for European economics. His book Crashed contains an excellent history of the Eurozone crisis, and this September he will be releasing Shutdown, his account of the coronavirus crisis.
I ended up cutting out a lot of my discussion of the EU vaccine rollout, but this essay from Jillian Deutsch and Sarah Wheaton at Politico is very clarifying on a number of points.
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References
“...the ECB’s threat to cut off financial support to Ireland...” Adam Tooze, 2018. Crashed: How a Decade of Financial Crises Shook the World. P.275
“...Grexit.” Vlogbrothers, 2015. Understanding the Financial Crisis in Greece
“...broad coalition of mostly white people...” Akala, 2018. Natives: Race and Class in the Ruins of Empire. P. 418
[Links to events mentioned in the pandemic timeline are embedded in the text]
The Irish Times Inside Politics Podcast
For more on the spectacle of U.S. politics, see Ezra Klein, 2020. Why We’re Polarized. Chapter six.
“When EU officials look into The Mirror of Erised...” Adam Tooze, 2021.Chartbook Newsletter #12.
“Europe’s older age structure” Eurostat, Population Age Structure; Wikipedia, Demographics of the United States
All insights into vaccine rollouts taken from Jillian Deutsch and Sarah Wheaton, 2021. How Europe Fell Behind on Vaccines. In politico.com
Economic analysis taken from Adam Tooze, 2021. Chartbook #12and Chartbook #13
For more on the U.S. recovery package, see Matthew Yglesias, 2021. Meet the American Rescue Act. In Slowboring.com
For an argument in favour of abandoning the Euro in a recession, see David McWilliams, 2012. Follow the Money.
For an argument in favour of weakening the European Council, see Guido Montani, 2019. For a Democratic European Government. In socialeurope.eu
Public opinion stats taken from European Commission, 2020. Standard Eurobarometer 93.
On the disproportionate power of the Irish in the EU, see Noelle O’Connell, 2021. Irish People and Jobs in EU institutions. in IrishTimes.ie