Brussels & Berlin | April 2020

The European Union started 2020 out with a bang. It announced grandiose promises of digital sovereignty, ambitious climate change mitigation plans, and a futuristic optimism about the direction of the continent. The outbreak of COVID-19 has suddenly shifted legislative agendas and forced countries and the European Commission alike to enact sweeping policy changes. Like the bloc itself, the European Union’s coronavirus experience has been variegated.

The European Union

Countries throughout the EU have halted business at least through mid-April, leaving open the very real possibility of extending that deadline. The transition to more remote work has affected EU citizens and institutions alike. The European Parliament held its first virtual vote, which many pundits were quick to note decreased fighting among MEPs. The monthly commute to Strasbourg has long been a policy of contention among MEPs and staffers, many of whom view the commute as unnecessary, costly, and harmful to the environment. If confinement measures in Europe persist well into this year, the success of remote work will increase pressure on the European Parliament to rethink its satellite location in France.

In the EU, public health and healthcare are competencies of member states, not the EU. Monetary policy, however, does reside with the EU, which has already introduced sizable bailout measures with relatively few strings attached. To date, the EU stimulus plan, which supplements member states’ bailout packages, amounts to roughly 7.3% of euro area GDP. The European Central Bank’s Pandemic Emergency Purchase Programme (PEPP) seeks an acquisition of public and private securities to the tune of 750 billion euros. The EU has also announced it will spend 50 million euros on medical equipment destined for hospitals.

Furthermore, with a fund of 164 million euros from the European Innovation Council (EIC), the European Commission has encouraged startups and SMEs in the technology and innovation sectors to ramp up production of personal protective equipment (PPE) and other medical necessities such as ventilators. Echoing the 2008 financial crisis, countries like Germany and the Netherlands have been reticent to support large bailout plans for countries such as Greece, Italy, Spain, and—this time—France.

France, Greece, Italy, and Spain are increasing pressure on the European Union to issue debt bonds (referred to as “corona bonds”) to help member states finance their responses to the pandemic. Mediterranean member states argue that all EU countries will be running significant budget deficits and that countries have a right to borrow at reasonable rates. Four EU member states, referred to as the frugal four, currently oppose the corona bonds. These four countries—Austria, Finland, Germany, and the Netherlands—instead favor tapping into the European Stability Mechanism (ESM), a tool created during the 2008 financial crisis that still has 410 billion euros in its coffers. Countries across the EU associate the use of the ESM with austerity measures and have renewed calls for a more robust collective response.

Aside from talk of bailouts and austerity, another source of ongoing tension within the EU is internal trade among member states. Export restrictions, ranging from food to medical supplies, have increased across the world, and the EU is no exception. EU companies currently require approval to export medical supplies, and EU member states are internally restricting trade with each other, which many view as a blatant violation of internal market standards.

The pressure from COVID-19 is expected to push back a number of agenda items that European Commission President Von der Leyen had been expected to produce this year. The digital portfolio is particularly affected, as tangible policy proposals on artificial intelligence, the digital economy, digital sovereignty, and more will have to wait until time and resources become available. Overall, while the scope and monetary value of the bailout will likely grow in the coming days, member state and regional responses to the pandemic have varied significantly.

Member States

Italy has been the most acutely affected country, reporting over 11,000 COVID-19 related deaths since the outbreak. Early in the crisis, the Italian government struck a deal with large lenders that resulted in the pause of large payment obligations, such as mortgages. Shortly thereafter, France followed suit with mortgage-pausing policies of its own. Under extreme strain, Italy has accepted aid, including medical supplies and volunteer doctors, from EU neighbors as well as China, Russia, and the U.S. This Chinese support of the EU, whether in the form of doctors or masks, has been met with significant controversy among the staunchly pro-EU. It has also received outsize media attention compared with intra-European assistance measures, such as the French donation of one million masks to Italy.

While a pause on mortgage payments may seem aggressive, Denmark has taken even stronger action to protect its people and economy. The Danish government has agreed to pay 90 percent of contract workers’ salaries and 75 percent of full-time workers’ salaries, in addition to providing bailouts for small businesses. Together, the Danish bailout plain amounts to nearly 13 percent of its GDP.

Germany, despite having a Chancellor in quarantine at the moment, has led the EU in responding to the pandemic. Thanks to widespread testing and an agile health care system, the current COVID-19 death rate in Germany hovers around 0.5 percent, the world’s lowest. Chancellor Merkel has called this pandemic the biggest crisis since WWII and has led a swift German response to the crisis both domestically and within the EU. Medical personnel from Germany have traveled to Italy to volunteer, while neighboring French citizens have been air-lifted to Germany to receive life-saving medical support. Like many other EU countries, Germany sent medical evacuation planes to the U.S., offering citizens free transportation home, where there are superior healthcare systems.

In countries with drastically different social landscapes, life has gone on in more or less typical fashion. In Sweden for example, citizens have adapted relatively easily to the very limited changes the government has implemented. In early April, restaurants and most schools (aside from high schools and colleges) remained open, as did non-essential businesses. Sweden, a society more traditionally prone to social distancing, contrasts starkly with France and Italy, where once bustling streets and cafes seem nearly abandoned.

At the other end of the spectrum lies Hungary, where the pandemic has intensified an already substantial democratic backslide. On March 30, the Hungarian Parliament passed the “Law to protect against the coronavirus.” This law indefinitely extends the current emergency period, under which Orban has dictatorial powers. The bill suspends parliament as well as elections and includes a provision of up to five years imprisonment for spreading fake news. The bill also includes up to eight years in prison for failing to abide by coronavirus-related restrictions. This hard shift toward authoritarianism invites a strong response from the European Union, which scholars and activists have been quick to advocate.

Civil Liberties and COVID

Hungary is not alone in its pandemic-related democratic backslide. Of the Council of Europe’s 47 member states, four of them (Armenia, Moldova, and EU member states Latvia and Romania) already suspended civil liberties under the guise of combating COVID-19. In Romania, the military is enforcing strict lockdown measures. In Serbia, a potential future EU member state, President Vucic celebrated with significant fanfare a Chinese delivery of medical supplies but hardly acknowledged an EU delivery that was much more substantial in size.

Slovakia’s center-right government has taken data processing a step further. It has recently indicated it will pass into a law a provision that explicitly condones the government acquisition and use of telecommunications companies’ data on private citizens. Overall, this pivot toward authoritarianism both inside the EU and in its neighborhood adds pressure to an already burdened European system. On March 27, Margrethe Vestager, European Commission Executive Vice President for Digital, urged the public to trust the government, but cautioned that “there is a risk that if certain thresholds are removed during a crisis, it can be hard to go back.”

Conclusion

Overall, skeptics of the European Union have been quick to conclude that the EU will be unable to withstand this pandemic. However, the EU has overcome tremendous hurdles before, such as the 2008 financial crisis and the 2015 migrant crisis. The bloc is designed to withstand a crisis of this magnitude, fortified by legacies of cooperation and collaboration. As European Commission President von der Leyen said in a March speech, “None of us can do it alone and certainly no Member State can handle this crisis on their own. Because in this crisis, and in our Union more generally, it is only by helping each other that we can help ourselves.”

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