North vs. South: the forgotten crisis killing Europe

Europe, North vs. South: sharpened by the crisis of Covid-19, will the financial differences spark the demise of a politically unified Europe as we know it?

The 1999 inception of the eurozone forged a path for financial commonality within Europe, bolstering the persistent desires of peace and political unity following the continental carnage of the Second World War.  Whilst consequential in the movement toward a greater unified Europe, the divide between North and South would soon spell difficulty for the solidarity of the eurozone.  Such divergence can be historically accredited to the growth of the Industrial Revolution, emerging in the United Kingdom and spreading exponentially among Northern States (Figure 1). Industrial growth ushered in a new age of business, yet, for those on the ‘back foot,’ a lack of economic output would only entice trouble: higher unemployment, lower GDP, reduced industrial infrastructure and subsequently larger gross debt per percentage of GDP, contributing toward a more economically unstable South that continues to exist in Modern Europe (Figure 2). Without comparable infrastructure and economic strength, Southern Europe has been historically misplaced in terms of financial authority; whilst the much more frugal and commercial Northern States have emerged as a figure of control over the eurozone. Such imbalance can only exist for so long in any form of collective international community before they mount to a political and economic boiling point.

The unforeseen disruption of the Covid-19 pandemic has only exacerbated such pre-existing dispositions between North and South. Those hardest hit by the pandemic, both physically and economically, feel neglected by the EU. The Coronavirus Response Investment Package made available immediate liquidity to such nations – predominantly Italy and Spain – within the eurozone. Whilst introducing short term economic stability and avoiding complete economic collapse, the package came coupled with spending regulations and did not comprehend the long-term aid required for debt-laden member states. Promoting unity within the eurozone, finance ministers in France, Spain and Italy proposed the mutualisation of incurred coronavirus debt via ‘coronabonds,’ alike to the rejected idea of ‘eurobonds’ following the 2008/9 financial crisis.

Opposed by the ‘Frugal Four’ (Austria, Demark, The Netherlands, Sweden) and Germany, ‘coronabonds’ have remained a continual demand of Italy and Spain, who have refused to be victims of economic polarity. Financial disparities have begun to incite anger, a result of neglect from the financially stable members of the eurozone amid an existential and economic crisis. Italy’s agony is profound. The pandemic ravaged an already struggling nation and the lack of significant assistance has caused an increasingly prevalent anti-EU sentiment countrywide. Italian Senator Gianluigi Paragone launched his ‘Italexit’ party in late July, gathering support and inspiration from Nigel Farage, the British politician instrumental in the United Kingdom’s departure from the EU. The traction of the movement may be difficult to reverse, with one poll concluding that 70 percent of Italians have little or no trust in the EU.

Financial dispositions between North and South do not simply represent the economic characteristics of individual states, they allure to the ever-widening political divides within Europe. For some, the division of the EU creates heartbreak, while for others, hope. The perennial partitions within Europe, long overlooked and disregarded, have this time reared their heads without fear of expulsion, with the rightful desire of honest unity. A politically connected Europe appears already to be on life-support. The question now is how can we avoid the plug being pulled?