Coronavirus reveals another example of EU disarray

Sean O’Grady looks at how the recovery package for Covid-19 has caused another rift in the bloc

Angela Merkel with Ursula von der Leyen and Emmanuel Macron (AFP/Getty)

In their uniform white face masks, the leaders of the European Union look a little like anxious doctors conferring on how to treat a sick patient, some favouring a larger dose of medicine, some a smaller one, others still wondering whether other treatments might be preferable.

It is an apt image, given they spent a mammoth 100 hours trying to find a consensus about how the European economy, in a severe recession, should recover from its brush with Covid-19. Specifically, the discussions, which took several days – the longest summit since the Nice constitutional marathon in 2000 – concern how the €750bn package of coronavirus recovery loans to the weaker, harder-hit economies, such as Italy and Spain, should be structured. Should the liability to repay the loans to borrowers be the responsibility of the EU as a whole, which is issuing and backing them; or fall more directly on the nation states actually receiving them? The question is fundamental, and the arguments show both the strengths and weaknesses of the European Union.

At the moment the weaknesses are the more dramatic feature of events. The most glaring is a lack of European solidarity. The “frugal four”, being a more fiscally conservative group led by the Netherlands with Austria, Denmark and Sweden, all wealthier northern members, object to what economists call “moral hazard”; that their taxpayers would be liable for a default on a loan by another country, usually cited as Italy.