The EU has to find common responses to face economic impact of coronavirus

Employment and Social Affairs

Coronavirus pandemic constitutes an unprecedented challenge for Europe and the whole world. It requires urgent and comprehensive action at the EU, national, regional and local levels, also because the economic downturn and job losses resulting from this could be worse than the global financial crisis of 2008.

Off course the top priority is to fight this global war against the “invisible enemy” from the point of view of medical treatment assisting the one affected. But at the same time it is indisputable that economic consequences could potentially have an even bigger impact that the virus itself: it is estimate that the GDP loss for the States economies would be around 2 per cent each month the crisis will go on, as an average, and we still don’t know when this strange period will definitely come to an end.

‘‘This pandemic is a global challenge, so we need a global response,’’ stated Roberto Azevêdo, director-general of the World Trade Organization (WTO). ‘‘Governments are introducing fiscal and monetary stimulus, and this is positive. Coordinating efforts will increase our collective recession-fighting power. Transparency and information sharing are also a critical part of crisis response,’’ he stated.

Thus, the pandemic requires inevitably a global response and no State can defeat alone this challenge. And the EU is first and foremost called to give a common answer in those difficult times, when is heading into a deep recession as its economy has come to a standstill amid efforts to mitigate the spread of the virus. “The coronavirus pandemic poses an existential threat to the EU”, according to French President Emmanuel Macron that also spoke about the danger of a “death of Schengen”, as a reference to the key agreement guaranteeing free movement within the Union. Up to now the EU has recognized – as envisaged in the joint conclusions of the “virtual” European Council on 26th of March – that Member States need flexibility to do everything that is necessary. And the Commission proposal for a Coronavirus Response Investment Initiative will provide 37 billion euro of investment under cohesion policy to address the consequences of the crisis. With the proposed amendment to the EU Solidarity Fund, that Fund can also be used for public health emergency situations such as the COVID-19 outbreak.

But many member States driven by Italy and Spain, two of the countries hit the most by the virus, ask the EU to do more. Italian Prime Minister Giuseppe Conte concluded the videoconference by declaring that he would not support the leaders’ concluding statement, if there will not be an agreement over the “corona bonds”. This financial instrument, proposed by Italy together with other 8 member States including France, is still opposed by the Netherlands and Germany.

“We need to react with innovative financial tools,” Conte told his counterparts. “This crisis is exceptional and unique and requires a very strong answer”, recognized EU Council President Charles Michel speaking after the summit. “Euro zone finance ministers will have to continue working and make proposals on tools “within two weeks,” he said.

The issue in fact will be further analysed by the Finance ministers, but it is still crucial for the EU to find a common solution. Germany and the Netherland strongly opposed the proposal by Italy, Spain, Portugal, France and others to issue joint bonds. “If we don’t respect one another and if we don’t understand that in the face of a common challenge we must have the capacity to respond to it together, no one has understood anything about what Europe is all about,” Portugal Prime Minister Antonio Costa said. In the absence of agreement, the leaders gave their Finance Ministers two weeks to try to work out a way forward, while European diplomats said it would be hard for the ministers to agree given that how deeply split are the countries up to now.

If the EU fails to find a common ground during this historic crisis, it would be hard not to face a new negative impact in its popularity: economic difficulties and unemployment are the ideal habitat for the spread of populism, and that’s why Member State should be very careful in giving adequate solutions to the citizens more exposed to the crisis.

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