Covid-19 and European recovery: what to expect?

While implementing anti-Covid measures, EU Member States were dragged into severe recession and ideological conflicts. A political dialogue within a divided Union is needed

The European Union is a political and economic organization crossing different policy areas, with its crucial concept of European integration being upheld throughout several external and internal crises, the most recent of which is Covid-19. While implementing restrictive measures to battle the pandemic, the Member States were dragged into severe recession and ideological conflicts by the sudden paralysis of their economies. The EU forecasts that its economies will contract by 7.8% by the end of 2020.

In May, the EU Commission unveiled a €750 billion Next Generation EU stimulus plan, including €500 billion in grants, together with a long-term revised proposal for the EU’s budget 2021-2027. The Frugal Four, Austria, Denmark, Netherlands, and Sweden, fiercely opposed this proposition during July’s Special European Council. They negotiated to reduce the grants’ total value to €390 billion, endangering the capacity of the plan to bolster the public finances of the most severely damaged countries.

The financial reporting system

Notably, European integration could also face a challenge in wavering solidarity within the Union. National reform plans must be presented to the Commission and to the Council. The Netherlands’ concerns regarding the monitoring use of the fund led them to request a right to an emergency break: if a State casts doubts on another’s ability to wisely use the Recovery Fund, it could address its concerns to the Council, suspending the cash flow.

Another point of friction has been the legal prerequisites to access the money. Hungary and Poland, which stirred comments in the past few years by progressively undermining their democratic system, opposed the proposition of strictly adhering to the rule of law. They have now been accused of starting to water down proposed policy and slowing the negotiations.

Although some Member States have called for a more robust and in-depth financial reporting system, others suggested a more moderate solution. Thus, a monitoring system has been set up to ensure an appropriate growth rate for the European economy and introduce a unanimous economic vision.

A European identity

An efficient implementation of the stimulus measures will instil goodwill throughout the EU and mitigate the criticism over the European economic ideology leading to a European identity. A good way to establish this may be to break the problem in two:

• In the short-term, a steady implementation of the recovery plan is necessary to gain favor in countries such as the Visegrad group where Europeanism is weaker;
• In the long-term, a sense of unity would inspire European citizens to rally together: the more people are involved and walk in the shoes of other Member States, the easier it would be to find shared ground for greater cooperation.

The further development of communities within the Community could initiate a political dialogue within a divided Union. To disregard finally the divided paths between the North and South, accepting and recognizing the uniqueness of each approach could be a major proponent of unity within the EU, rather than a source of discord.

The EU has always faced crises, but its problems have never before reached such a scale. The very wording of conditions contained within the economic plan has highlighted the different national approaches creating political deadlock and slowing EU recovery. The mentioned, two-step approach should act to bind and rebuild the fragmented Union, starting with the careful release of the recovery fund to all heavily-impacted economies. The unity at the heart of the fund must be politicized and further integration pursued. If successful, this will sow the seeds of a stronger union better equipped to face the growing list of challenges at its door.