One of the immediate fallouts of the Coronavirus Pandemic has been the unveiling of the fault-lines in intergovernmental bodies and the flaws in the idea of a world without borders. After the WHO, one such prominent institution coming under fire is the European Union which is a turning out to be futile and useless, especially in the eyes of Italy which has been the worst-hit European nation by the Coronavirus Pandemic.
At the root of this new crisis is the disillusionment of Italy with the European Union over ‘Corona bonds’. Italy and Spain have been bearing the brunt of the Pandemic since March and they want the European Union to help them but they have been let down completely.
Fissures have emerged within the European Union on how to tackle the Coronavirus Pandemic, and discussions have been going on between Finance Ministers from the member countries and those who use the Euro currency to arrive upon a coordinated strategy to support the Coronavirus-battered members.
However, discussions haven’t resulted in any positive outcomes for the European Union. The EU countries have committed huge sums of money to support businesses and workers that are going to run into trouble in face of an imminent recession.
EU has been able to take only piecemeal measures to soften the effect of a deep recession that will be inevitably triggered by Coronavirus-related lockdowns and travel restrictions.
It has relaxed the limits on budget deficits that might allow countries to borrow more, and the European Central Bank has pumped in hundreds of millions of dollars into Coronavirus-affected markets to create a cushion for reducing the effect of the ongoing financial crisis.
Countries like Italy and France, however, want more out of the European Union (EU), and have been pressing for the issue of debt, that is, Corona bonds, to raise long term finance that would help the markets that would be devastated by the COVID-19 outbreak.
A letter written by leaders of nine out of nineteen countries in the Eurozone, including France and Italy, stated, “The case for such a common instrument is strong, since we are all facing asymmetric external shock, for which no country bears responsibility, but whose negative consequences are endured by all.”
But a confrontation is clearly emerging in Europe, while countries like Italy and France want the issuance of Corona bonds, other countries, especially the Northern European countries are not willing.
In fact, there is a broad consensus from Vienna to Berlin to Helsinki against Corona bonds. Led by Germany, this faction of the bloc has long been opposed to raising debt at the European Union level.
While Berlin wants to avoid issuance of Corona bonds, it has been able to find support in other countries like the Netherlands which have been more vocal and direct in their criticism of issuance of debt that can help Coronavirus-battered economies in sailing past the Pandemic-triggered recession.
German Chancellor Angela Merkel, backed by Austria, the Netherlands, and Finland feels that issuance of debt would virtually mean their taxpayers underwriting spending by poorer members.
Last month, Merkel said, “We made clear from the German side, but also others did as well, that this (issuance of bonds) is not the opinion of all states.”
As Germany, which recently released a $1 trillion rescue package for reviving its own economy through loan guarantees, direct cash injections and other emergency assistance, rejected Italy’s requests for Corona bonds, anti-EU sentiment is taking deep roots in Rome.
Berlin insists that it is more generous than ever but Italy understands that is not the case. Last week, Italy’s Prime Minister Giuseppe Conte had threatened to block a planned statement from EU leaders on the Coronavirus response in the region if Rome’s demands for issuance of Corona bonds were not accepted. He had said, “We will fight to get the eurobonds,” and added, “I will not sign [a statement of EU leaders at the end of the meeting] until I have a panoply of adequate instruments for the challenge that we are facing.”
Italy is not satisfied with the present EU measures such as the European Stability Mechanism (ESM), while the faction led by Germany continues to push for ESM and similar other tools.
The Brussels project is now crumbling, and already battling Brexit, the European Union might now be staring at Itaxit. Social media is now replete with Italians burning the EU flag out of sheer disillusionment towards the Continental bloc.
Italians are now eager to break away from the European Union, with as many as 59 percent of respondents saying that EU membership doesn’t make any sense in a recently held opinion poll.
As Italians seethe at the European Union’s lackluster and unimpressive Coronavirus response, and the pro-Brussels voices are thus getting muzzled under the weight of Italy-led Euroscepticism.
Ever since the idea of Brexit started picking up, Italy has been touted as the next European country which might want to exit the bloc. And it seems that the inability of the EU to issue Corona bonds and shore up markets hit badly by the Pandemic, might prove to be the reason of its undoing.