Brussels & Berlin | August 2020

In late July, following tense negotiations that echoed divisions of the financial crisis, the European Union at last agreed to a massive bailout of $857 billion. When countries and their economies were forced to shut down during the pandemic, countries such as Greece, Italy, Spain, and France—countries still recovering from the 2008 Financial Crisis—were hit especially hard.

The European Union

In late July, following tense negotiations that echoed divisions of the financial crisis, the European Union at last agreed to a massive bailout of $857 billion. When countries and their economies were forced to shut down during the pandemic, countries such as Greece, Italy, Spain, and France—countries still recovering from the 2008 Financial Crisis—were hit especially hard.

The debate was ultimately quite contentious, with the frugal four (Austria, Denmark, the Netherlands, and Sweden) hoping to avoid a repeat of the 2008 bailouts. The frugal four argued that the bailout should be doled out via loans to countries with less financial stability and in general wanted to avoid domestic uproar among voters and taxpayers over a bloated EU budget.

Ultimately, the bailout package set many new precedents. Money for the bailout will be raised via the collective, rather than individual, sale of bonds. Furthermore, money will be distributed as grants, rather than loans, to avoid certain countries assuming greater debt. Indicating lessons learned from European tensions and negotiations during the migrant crisis, Chancellor Merkel defended countries in the South, putting her at odds with the frugal four, namely Dutch Prime Minister Mark Rutte.

Compared to the US, the EU has experienced moderate success in flattening the curve, due largely to immediate lockdowns at the outbreak of the virus. France currently leads daily infection rates, followed by Romania and the U.K. Like the U.S., the Eurozone is experiencing its sharpest contraction since before WWII, although to a much less severe degree than the U.S. In the second quarter of 2020, the Eurozone economy shrank by 12.1 percent. At the end of June, EU unemployment hovered around 7.4 percent. In the U.S., unemployment currently stands at over 10 percent, and the American economy contracted nearly 33 percent in the second quarter.

Back to School

Back to school policies vary throughout the EU. Denmark, for example, was able to reopen schools in the spring, after having sufficiently flattened its curve following arguably the strongest European government response to the pandemic. In France, schools are scheduled to reopen on September 1, except in high danger zones, such as Paris and Marseille. Italy, one of the countries most adversely affected by the virus, has decided to reopen its schools with reduced classroom size. Social distancing measures and mask-wearing will be mandated. However, Italy faces a shortage of 20,000 additional classrooms needed to accommodate smaller classroom sizes.

In Other News

Despite the pandemic, the technology policy world has been abuzz this summer. In July 2020, the Court of Justice of the European Union invalidated the Privacy Shield, claiming that U.S. data protection failed to meet European adequacy thresholds. The Schrems II case very publicly exposes the lack of a privacy regime in the U.S. and puts the burden on data exporters (i.e., European firms) to conduct enhanced due diligence when sending data to the U.S. While some fear the “[d]emise of Privacy Shield may be the end of U.S.-Europe data transfers,” the U.S. Commerce Department has already launched new discussions on how to move forward. However, on August 18, a group led by Schrems filed 101 complaints in a new challenge to US-EU data transfers in a move that could implicate companies like Google and Facebook but also banks and AirBNB Ireland.

Secretary of State Mike Pompeo toured Europe in August in hopes of attracting additional countries to join the Clean Network Program, which seeks to exclude Chinese technology from digital infrastructure, namely undersea fiber optic cables, telecoms, apps, app stores, and cloud service providers. This new announcement represents an expansion of its earlier “clean” 5G agreement, which sought to restrict Chinese inputs on 5G equipment. So far, Poland, the Czech Republic, Estonia, Latvia, Poland, and Romania, have agreed to use companies like Ericsson rather than Huawei or ZTE. During Secretary Pompeo’s trip to Europe, Slovenia also joined.

Elections and Politics

On July 12, after weeks of debate about whether or not elections would proceed as scheduled due to COVID-19, Polish citizens took to the polls to vote in a race between conservative incumbent President Andrzej Duda and liberal Warsaw Mayor Rafal Trzaskowski. In the narrowest election since the fall of communism in the country, President Duda edged ahead. Duda opponents alleged serious flaws in the election, from missing ballots to disenfranchisement of citizens living abroad. The election outcome was contested and eventually reached Poland’s Supreme Court, which sided with Duda. As further reason to suspect the electoral outcome, Duda’s opponents point to policy changes he made in 2017 that provided the president with significantly more power over the Supreme Court. In September, the European Court of Justice is set to rule on whether Poland’s Supreme Court meets the criteria of an independent judiciary.

In August 9th elections in Belarus, 80 percent of votes were awarded to President Lukashenko, often referred to as “Europe’s last dictator.” Lukashenko has held the position since it was created 26 years ago. Since the election, Belarusians have taken to the streets in mass protests, demanding Lukashenko’s resignation, and opposition leader Svetlana Tsikhanouskaya was forced to flee to Lithuania for her safety. Dissidents, protesters, and innocent bystanders have been rounded up and forced into prisons, where security forces have beaten and illegally detained them. Despite mounting pressure to resign, Lukashenko vowed, “There will be no new election until you kill me.” Although relations between Minsk and Moscow have at times been fraught, the election of Tsikhanouskaya would move Belarus much closer to the European sphere of influence than it currently sits.

Belgium is once again back in the headlines—not for an election, but for how long the country has gone without a government. Belgium recently broke its previous record of 541 days without forming a government and has currently gone over 600 days without no government. Belgium has experienced one of the highest death rates per capita due to COVID-19, and this lapse in leadership has real-world consequences, especially amid a possible second wave of infections in the country.

Trade Talks

In August, as part of the ongoing Airbus dispute, the Trump Administration opted against increasing tariffs on European exports to the U.S. The administration instead adjusted some of the existing tariffs, reallocating them in a way that provides relief for certain countries, while increasing tariffs on goods from other countries. Among the lucky to receive relief were Italian pasta and wine producers, who had feared increased tariffs, as well as Greek cheese producers. In a move intended to punish France for its commitment to digital taxes and Germany for failure to meet its NATO spending commitment, the administration levied tariffs on jam, a major agricultural good of both countries. Other tariff rates remain unchanged, such as the 25 percent tariff on certain French wines.

Conclusion

As Americans look longingly toward Europe, where a semblance of normalcy has arrived just in time for August holidays, the EU nevertheless cautiously awaits the next phase of COVID-19. Will the virus subside amid ongoing measures like mask-wearing, or will a second wave, which has already begun, hamper progress achieved over summer?

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