Impact of the Coronavirus Pandemic on the European Union
Himani Pant, Associate Fellow, VIF

The coronavirus disease (Covid-19) has evolved as a global pandemic1 ever since its outbreak in China in December 2019.2 This highly contagious disease has infected around 800,000 people worldwide in a short span of three months. The epicentre of the Covid-19 pandemic shifted from China to Europe in early March when Italy, Spain and other European countries, began to report a sharp rise in infections. The older population of (Northern) Italy turned out to be especially susceptible to the infection,3 resulting in over 10,000 casualties in less than a month. With close to 7000 deaths, Spain is the second worst hit European country after Italy (Table 1). Importantly, these numbers surpass the death toll in China (3,304 so far).

The virus has now spread to all the members of the EU and “poses another test of its resilience as a community based on solidarity and common values”.5 While this calls for “urgent, decisive, and comprehensive action at the EU, national, regional and local levels,”6 the EU has struggled to coordinate national responses so far. This is because the Commission has limited capacity in the domain of healthcare, the governmental power for which rests with individual member states. As a result, an EU-level crisis management has not been very forthcoming although the Commission has taken some measures in this regard. These include the launch of a Coronavirus Response Investment Initiative of 37 billion Euros to deal with the aftermath of the crisis. The European Central Bank has come up with a 750 billion Euros bond-buying programme “to address the fallout of coronavirus”7. In addition, the scope of the European Union Solidarity Fund (EUSF)8 has been broadened to include a public health emergency like the Coronavirus outbreak. The EU has also suspended the Stability and Growth Pact “which required a country's budget deficit to stay within 3 per cent of GDP and its national debt to not surpass 60 per cent of the size of its economy”9. The escape clause10 now allows countries to spend freely on medical equipment in order to check the rise of Covid-19. Aimed at mitigating the slowdown caused about by the coronavirus pandemic, this measure is aimed to give governments "the needed flexibility to take all necessary measures for supporting health and civil protection systems and to protect economies”11

Meanwhile, the actions of individual member countries like sealing of the borders indicate that the member countries undertook several hasty measures to check the spread of the Covid-19 without consulting the Commission. Their leaders employed the ‘nation first’ logic while dealing with the Covid-19 pandemic, contrary to the Commission’s stance and principles of European solidarity.12 Italy’s calls for the much-needed masks and ventilators went unheeded by member states- France and Germany even blocked the supply of medical supplies13, a move which was heavily criticised by the Commission President Ursula von der Leyen. China’s well-timed medical aid to crisis ridden Italy at this juncture accentuated the divided image of the EU further and gave the impression that the EU had deserted Italy “in its hour of need” 14 Later, Russia also went on to send medical supplies to Italy, exacerbating the fragmentation further. These medical supplies, although under scanner for their quality issues, were done at a time when the United States shunned all possibilities for cooperation by closing it borders to Europe. This has also called into question the resilience in transatlantic relations.

The divide is also visible in that the EU member states differ in their stance on the financial response to deal with the ongoing health crisis. While some of the countries including Italy and Spain have called for a common debt instrument or corona bonds to raise funds in the market,”15 others like Germany and the Netherlands have opposed the pooling of their debt. They, in turn, favour the European Stability Mechanism (ESM)16, a conditional bailout fund set up during the Sovereign debt crisis with a lending capacity of 410 billion Euros.17

In terms of the implications of the coronavirus, it would have lasting economic, political as well as security repercussions for the EU just as it would have for the rest of the world. However, the stakes for EU remains higher as the aftermath of the Covid-19 crisis would also test the foundation of its supranationalism which is under tremendous pressure already. The economic toll of the coronavirus has already manifested itself in the form of global recession. 18 The Eurozone GDP is estimated to contract by one almost 1.8 percent and 3.2 percent by the end of the first and second quarters of this year respectively. This would make the incoming slump more severe than the one experienced by the EU during the sovereign debt crisis. The European tourism industry alone is said to experience an estimated financial loss of roughly one billion Euros per month.19 The prolonged lockdown has adversely impacted several big and small enterprises which would now desperately look for foreign direct investment to survive. A big challenge for the EU under these circumstances, as Commissioner Ursula von der Leyen puts it, would be “to preserve EU companies and critical assets, notably in the domain of health, medical research, biotechnology and infrastructures,” areas deemed indispensable for “security and public order.20

Apart from protecting its companies and assets from foreign takeover, the EU would also have to work towards circumventing an economic fallout among member states. The economic survival of the most vulnerable countries like Italy and Spain which have been worst hit by the corona crisis is also vital for the survival of the Eurozone and the EU itself. The EU’s efficiency in the survival and recovery of these countries would require a great deal of solidarity among member states. The EU could, in fact, emerge stronger by rising up to the challenges posed by the Coronavirus.21 Any headway in this respect would infuse a new zeal into the EU in this post Brexit phase. Finally, Covid-19 has halted decisions regarding a fair distribution of refugees between EU member states and the resettlement of most vulnerable refugees coming via the Greece-Turkey border. 22 A related issue is this respect would be the course of Europe’s demographic trajectory. At a time when the EU has lost thousands of its citizens to coronavirus, there is likely to be a greater resistance towards accepting refugees.

Overall, the Covid-19 outbreak highlights the EU’s apparent unpreparedness to deal with the crisis. The EU was caught almost off-guard when the cases began to peak in March. To a great extent this is because the onus of healthcare sector rests with individual countries. However, the rapid spread of the disease to other member states continued unabated until they began to impose border controls. The delayed intervention from the EU in this respect has called into question its viability in times of emergency. In addition, the inward-looking responses from individual member states divulge a lack of cohesion in a supposedly ‘supranational’ EU. Nevertheless, the ongoing Covid-19 crisis still presents an opportunity for the EU to present itself as a resilient actor, provided it is able to contain the crisis in the coming weeks and deal efficiently with the economic aftermath.

References
  1. World Health Organisation, https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020
  2. John Hopkins Coronavirus Resource Center, https://coronavirus.jhu.edu/map.html
  3. OECD data shows that Italy has the second oldest population in the world, after Japan. People over the age of 60 or with comorbidities are believed to be at a higher risk of contracting the virus. Data available at https://data.oecd.org/pop/elderly-population.htm#indicator-chart
  4. https://coronavirus.jhu.edu/map.html
  5. https://euobserver.com/opinion/147861
  6. https://www.consilium.europa.eu/media/43076/26-vc-euco-statement-en.pdf
  7. https://www.euractiv.com/section/economy-jobs/news/commission-proposes-unprecedented-suspension-of-eus-fiscal-rules/
  8. EUSF was set up in 2002 in response to several floods in central Europe that year. It was created to deal with major natural disasters and express solidarity with disaster-stricken regions within Europe.Since then, the fund has been utilised for over 80 environmental disasters. For a full list refer to https://ec.europa.eu/region alpolicy/sources/the funds/doc/interventions_since_2002.pdf.
  9. https://www.euractiv.com/section/coronavirus/news/covid-19-france-wants-to-activate-eu-bailout-fund-without-conditions-or-delay/
  10. The escape clause was introduced at the height of the eurozone debt crisis in 2011..
  11. https://www.inbc24plus.com/eu-executive-supports-all-tools-to-mitigate-coronavirus-impact-on-economy/
  12. https://www.ecfr.eu/article/commentary_resilience_before_reinvention_the_eus_role_in_the_covid_19_crisi
  13. https://www.ecfr.eu/article/commentary_pulling_through_the_coronavirus_together_european_and_internatio
  14. https://foreignpolicy.com/2020/03/14/coronavirus-eu-abandoning-italy-china-aid/
  15. "Corona bonds" refer to a joint debt issued to member states of the EU. The funds would be common to all member statesand would come from the European Investment Bank.https://www.euronews.com/2020/03/27/the-future-of-the-european-project-is-at-stake-eu-in-crosshairs-of-coronavirus-pandemic
  16. https://www.esm.europa.eu/about-us/how-we-work#overview
  17. https://www.ft.com/content/cf4679b6-67c5-11ea-800d-da70cff6e4d3
  18. https://www.imf.org/en/News/Articles/2020/03/27/pr20114-joint-statement-by-the-chair-of-imfc-and-the-managing-director-of-the-imf
  19. https://www.euractiv.com/section/coronavirus/news/european-tourism-sector-urges-measures-to-mitigate-covid-19-impact/
  20. https://ec.europa.eu/info/live-work-travel-eu/health/coronavirus-response_en
  21. https://carnegieeurope.eu/strategiceurope/81370
  22. https://www.ecfr.eu/article/commentary_haven_and_hell_how_the_eu_should_protect_refugees_during_the_cov

(The paper is the author’s individual scholastic articulation. The author certifies that the article/paper is original in content, unpublished and it has not been submitted for publication/web upload elsewhere, and that the facts and figures quoted are duly referenced, as needed, and are believed to be correct). (The paper does not necessarily represent the organisational stance... More >>


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