Covid and EU: will the EU rescue the economy from the crisis?

Five students of the Model EU 2020, the training course held by Eastwest European Institute, analyze the response that the European Union is giving to the Covid-19 crisis

Covid-19 undoubtedly took the world by storm, unprecedented in its universality, economically paralysing to the functioning of the global economy and inflicting significant costs on human life. Due to the lack of a general agreement on how to act, most member states acted on their own by focusing on crisis management at home and unilaterally closing the borders, thus disabling the four freedoms of the internal market. The north-south divide from the Financial Crisis is still present, seen especially in questions about the need and nature of supporting EU measures, demanded much more persistently from the Eastern and Southern member states, in contrast to the Nordic countries, which have been quite self-sufficient in dealing with the crisis and overall required less guidance.

These divisions become more concerning when placed in the international context of China’s 2025 “Made in China” strategy, threatening to undermine the sovereignty of the EU in its fragmented state. Through the Belt and Road Initiative, the narrative of China as a rescuer for Eastern Europe through the 17+1 strategy, from the Brussels Consensus, prompted the EU to reconcile internal divisions, as reported by the Commission in the 2019 EU-China Strategic Outlook paper. Equally, relations with China are essential for the EU’s role in the emerging post-US hegemonic world of multilateralism. Whether the EU can rescue the economy from Covid-19 will thus depend on whether the policies it implements can address the disillusionment of its member states and reconcile the pressing economic disparities, exacerbated by the EU’s neoliberal austerity measures in the aftermath of the European debt crisis.

As a response to the Covid-19 outbreak, the European Union rearranged its top priorities in order to protect the health and safety of its citizens and sustain national economies. To achieve this, the Union ensured the provision of medical equipment, boosted research for treatments and vaccines, and supported jobs and businesses in light of the “Green and Digital Transformation”. All these measures are outlined in the Recovery Plan and financed by the Commission through its drastic measure of increasing the budgetary spending ceiling of states, activating the ‘general escape clause’. However, the final decisions on financial measurements still depended on whether the heads of European states could reach an agreement.

The debate on a possible EU financial strategy for recovery from the Covid-19 pandemic seemed to have an official finale at the Council of Europe meeting in July 2020. European leaders came together to the agreement, which put the fresh air on negotiations’ breakthrough. To deal with the worst recession in the history of the EU, it was agreed to set up a €750-billion coronavirus fund. These moneys will be partly based on common borrowing, which will be done by loans and grants, headed to the hardest-hit member states of the Community. In general, EU plans to spend €1.074 trillion from the general EU budget. Although the agreement on the budget seemed to bring salvation, it is already known today that it will not be fully implemented. Although the Reconstruction Fund was fully approved, the European Parliament rejected the rest of the plans, considering that they were too little dependent on, inter alia, compliance with the rule of law in the Member States. The work, although partially accepted, has therefore still not been completed.

All in all, there is still much work to be done to solve the crisis, but these measures certainly marked an important step in addressing the economic disparities in Europe and mending the fractures within the Union. Will the pooling of debt between member states present a solution for a coordinated European response entrenched in solidarity or will this set the EU on a dangerous trajectory towards economic fallout? In turn, could this exacerbate dependency on China and potentially jeopardise European sovereignty? Only time will tell.

Eastwest European Institute

Daria Derevianchuk (Kiev). 4th year of Bachelor degree in international relations, public communications and regional studies at the National University of Kyiv-Mohyla Academy. Interested in globalization, foreing affairs, diplomacy and human rights.

Ana Maša Leskovšek (Ljubljana). 4th year of Bachelor degree at the Faculty of Law at the University Ljubljana. Interested in International Law, EU Law, Diplomacy and Consular Law. Recipient of a special award from the mayor of Ljubljana for a research paper in History.

Giorgia Polo (Verona). Lawyer trainee. Master degree at Trento University, Curriculum in European and Transnational Comparative Law. Interested in International Law, EU Law, Energy and Climate Law, Consumer protection.

Clement Wallace (York). Anglo-French student currently starting the second year of History and Politics at the university of York, in the UK. Passionate about sports and part of the rowing team of the University.

Marta Wawrzyniak (Vienna) – 2020 Graduate of BA International Relations at University of Leeds and current student of ETIA – Masters of Environmental Technologies and International Affairs at Diplomatische Akademie Wien/TU Wien.