Europe has come together to fight the pandemic. What would have happened if we didn’t have the EU? 

‘Solidarity’ is one word that has gained common parlance in the past few months – solidarity with health workers, neighbours, even strangers. And that is to be expected as, in the face of a common enemy – in this case, the coronavirus pandemic – personal interests are put aside, in favour of common goals. Losing a battle this unexpected would be so catastrophic to the collective, that the personal almost pales. 

The European Union has, since the start of the pandemic earlier this year, put all its political, social and economic power into strengthening the collaborative spirit between its member states. 

Various examples abound. Under the Civil Protection Mechanism, since March, member states have had swift access to the first ever RescEU stockpile of medical equipment – ventilators, masks and other medical equipment were put at the disposal of hospitals across the EU, to help halt the spread of COVID-19. The EU also set up an international tender allowing member states to make joint purchases of equipment and drugs, and mobilised billions – including through measures approved by MEPs – in direct support to healthcare systems, which found themselves under extreme pressure because of the pandemic outbreak, and in support to the most deprived, SMEs, jobs and the economy. 

“What we all have in common is that none of us can really think or plan ahead with any great certainty about what the future of the pandemic really holds. This means that we all have a stake in this. None of us is immune to the pandemic and none of us can beat the virus alone. In fact, we will not truly be safe until all of us are safe” – so wrote Italian premier Giuseppe Conte, French president Emmanuel Macron, German Chancellor Angela Merkel, European Council president Charles Michel Norway’s prime minister Erna Solberg, Canadian prime minister Justin Trudeau and European Commission president Ursula von der Leyen, in a co-authored op-ed, to launch an online fundraiser, which to date has raised some €9.8bn in pledges to develop new tools to detect, treat and prevent the coronavirus pandemic to be accessed everywhere, by everyone who needs them. 

And that is because this spirit of solidarity not only aims to make the present better, but also the future – and for this, research is key. With the aim to promote research, the EU’s Horizon 2020 research programme is funding 18 research projects and 151 teams across Europe to help find a vaccine against COVID-19.
For research purposes, the European Commission and other partners launched a European COVID-19 data platform to enable the rapid collection and sharing of research data. 

The EU’s coordinated response also aimed to address the economic and social fallout from the pandemic. The Commission has come up with a fresh proposal for the EU’s long-term budget for 2021-27, which will include a stimulus package. This package – Next Generation EU – is worth €750bn and will be rolled out in three pillars: supporting member states to recover, repair and emerge stronger from the crisis; kick-starting the economy and mobilising private investment; and learning the lessons of the crisis and addressing Europe’s strategic challenges.

The European Parliament has also backed new rules to allow member states to request financial assistance from the EU Solidarity Fund and voted in favour of making €37bn from EU structural funds available to member states to tackle the coronavirus crisis.

The risks of stalling – or even dismantling – the EU are huge

There are various other strong signs of EU solidarity – a full timeline is updated here. The question, however, comes automatically – what would be the scenario if such solidarity was missing? And, to take it further, what would be the burden and cost of tackling the COVID-19 crisis, if there wasn’t a unified Europe? 

An in-depth study by the European Parliament Research Service aims to quantify this. Entitled ‘Coronavirus and the cost of non-Europe: An analysis of the economic benefits of common European action’, the paper focuses on the economic benefits of European common action, and studies the risks in the case that the current crisis were to stall or reverse European integration. 

Starting from the added value – that is, the economic benefits of EU integration – the paper says that since the launch of the single market project in 1985, this has on its own fueled a six to eight per cent growth in EU GDP. The European Central Bank estimate is even higher, claiming a 12 to 22 per cent increase. 

The risks of stalling – or even dismantling – the EU are huge. According to the study, the dismantling of the EU single market would cost the European economy between three and 8.7 per cent of its collective GDP, which translates into €480bn to €1,380bn per year. 

On a member state level, Felbermayr et al. (2018) calculate the estimated output loss. For old EU members, full disintegration of the EU would result in output losses of 5.2 per cent, the end of the single market accounting for 3.4 per cent of those losses. For new members, the total loss would be 10.7 per cent, the single market making up 7.5 per cent. In terms of intra-trade flows, losses would be as high as 30 per cent.

At the other end of the scale, further action and EU integration – such as action to address environmental challenges, higher investment in research and innovation, and completion of the digital single market – would result in overall potential gains to the European economy of €2.2 trillion per year, after a running-in period of 10 years. 

The health context is of particular relevance – especially considering the coordinated efforts to contain the coronavirus pandemic. Beyond these efforts, between 2014 and 2020, various success stories were registered on a European level, including the establishment of 24 European reference networks, the provision of support building capacity to respond to cross-border outbreaks and the training of health professionals and other front-line staff.

Further access to cross-border healthcare, better coordination and promotion of best practices between member states, and pooling research resources, can result in considerable benefits. The study highlights that estimates from the European Commission and the literature suggest that more effective action in the field of health could lead to potential gains of up to €72bn per year for the EU economy – and further advances in EU citizens’ health and well-being. 

‘Europe rose to the occasion’
MEP David Casa

“If Brexit marked the peak of a rising wave of Euroscepticism that dissipated soon afterwards, the coronavirus provoked a fresh knee-jerk reaction towards nationalism. The sentiment is understandable, as was the initial panic that ensued with lockdown measures amid the rising number of cases of the novel coronavirus. This happened even more so since every member state dealt with its own varying level of emergency, virus-spread and death tolls. 

“With reports of countries intercepting shipments of protective equipment on international runways, there was a fleeting hesitation and an uncharacteristic ‘every-man-for-himself’ response.

“Unfortunately, we saw that it invited an influx of disinformation from the East. A publicised report exposed campaigns to confuse the public on the nature of the virus, but also to erode trust in European governments’ responses to the pandemic. Europe had to work extra hard to show it was on the ball.

“On the whole, Europe rose to the occasion. Protective equipment and medical care were traded between member states in mutual ad hoc support. The goodwill is there, as are the structures to enable coordination. Like anywhere else, the EU did not have the promptest response as the world grappled with the extent of the threat.

“But that quickly changed. The Commission has been hard at work to organise coordinated action plans, especially when it comes to the economy. The latest package lays down the foundations for negotiations that will see billions of euro injected into the economies of member states in the form of loans and grants. The reactions have not been homogenous, but broadly they have been welcomed as a very good start to discussions.

“This package is of course an exceptional one, proposed in response to the most exceptional of circumstances. It is a one-off response to a very extreme situation, one which could have hardly been envisaged but one we set about dealing with. The plan isn’t to permanently change how the EU works, which has been a key concern with regards to Malta’s persistent objection to efforts to harmonise taxation across Europe.

“Malta has a voice in how we move forward, and it’s up to the Government to negotiate how much aid it will be set to receive. Up to this point, nothing has been set in stone, but good groundwork is being laid down at a positive rate.”

‘The EU project’s toughest challenge yet’
“Nobody alive has had any experience in combatting pandemics of this scale. The EU project has had to face its toughest challenge yet and going forward will be highly complex. Experience is the best teacher, and certain problem areas have been flagged. Improving on them will inevitably make Europe much more equipped to handle pandemics.

“One area of concern is the shortages of protective equipment and medical items that many member states faced as the world raced to hoard on pandemic-fighting gear. Solutions have been touted along the lines of a European stockpile to supply member states during the crucial first weeks of a similar emergency.

“Importantly, the problems that have been raised so far appear to be solvable, using existing mechanisms which have actually facilitated responses to the pandemic.

“Right now, the Commission and member states are forging a holistic strategy to bring out the best of the EU’s toolbox in how it informs and executes coordinated policy. The pandemic has undoubtedly kickstarted a proactive learning curve that is vying away from protectionism – to combat a future pandemic, we have learnt that more Europe, not less is key.”

‘A work in progress’
Alfred Sant

“EU member states have been trying to put together coordinated responses to the coronavirus pandemic at two levels: one the effort to contain the effects of the crisis obviously on the public health front, and as well on the economic front by which economies in hibernation were kept on life support; and now the second level by trying to organise a Europe-wide recovery programme.

“As far as the life support programmes went, all member states had their national programmes. In addition to them, at EU level, the charge was led mostly by the European Central Bank which stepped up its purchases of bonds issues by national governments, an effort that has had, still has, its vociferous critics, not only in Germany. Two far reaching measures were implemented from Brussels: the rules by which member states have to keep their national budgets deficits below three per cent of their GDP, and those by which state aids to firms are banned, were suspended. Also two major programmes were launched, one of which was to provide financial backup for the programmes of member states to support the income of employees driven out of work by the pandemic.

“When it came to setting up a Europe-wide recovery programme that is still, to put it mildly, work in progress. As of now, there has been great disparities between the public health and economic impact of the crisis on the different member states, with the large southern economies (Italy, Spain and France) being disproportionately put out of skew. That there should be a European recovery programme seemed to be agreed by all, but the form it should take remained in dispute – whether it should be on a loan basis or by way of grants; whether it should be funded by debt issued and guaranteed by the EU as a whole (“mutualised”) or whether all member states should separately stand responsible for their share in the outtake.

“The “southerns” were all for aid in grants and mutualisation; the “frugals” (Holland, Finland, Sweden, Austria) for aid in loans and no mutualisation; the Visegrad countries of Eastern Europe waited to see how the cookie would crumble. A partial breakthrough happened when Germany and France agreed it would be appropriate for the EU to have a recovery fund that would cover €500bn euros for allocation as grants.

“All this occurred in the middle of a persisting stalemate between member states regarding how their budgeting for the years 2021-2027 should be organised, the so-called Multiannual Financial Framework (MFF), where the disputes have been about how high EU expenditures should be set at. Here the frugals (in this case backed by Germany) wanted a low ceiling, the others a higher one, the Commission a still higher ceiling and the European Parliament yet higher.

“In her latest proposal, European Commission President von der Leyen made a smart proposal to merge the MFF programme with the needed European recovery effort. She went for the low ceiling over the long-term, however with frontloading of expenditures. The level of commitments would then be set on the high side (grossly put, this means the maximum “liability” above the agreed expenditures to which the budget can be taken, which basically does not usually involve member states in actual disbursements). The margins between the commitments and the approved expenditures would enable the Commission to borrow at very cheap rates some €750bn for the recovery programme, also to be frontloaded during the MFF period, and to be spent €500bn as grants (in line with the Franco-German agreement), the rest in loans. 

“There has been a precedent in the past for following this option to raise money. Since the EU budget is a Community instrument, the disbursement outlays for the recovery programme would be “mutualised” but each member state would be responsible for guaranteeing the funds according to the usual key by which financial responsibilities and dues in the EU are assessed.

“The von der Leyen plan too has hit a number of objections and reservations which are being trashed out in negotiations at low and high level between member states, such as: a persisting disagreement about the grant component; disagreement about the key proposed by the Commission for shelling out the funds among member states; the targets set for EU budget allocations in the medium to long term, and so on. If I understand correctly, Malta seems to be rather on the side of the frugals on these issues.

“Hopefully the next European Council (by distance meetings) should provide some progress. But that is not sure.”

Readiness for a future pandemic
“Frankly I do not see that there is such a readiness. The step forward though is that there is an awareness of such a need (for readiness), which previously did not exist. In non-economic terms, though with clearly an economic impact, there are issues related to a public health policy on a European basis for the single market (which presently does not exist), as well as the implications for free movement not least under the Schengen area arrangement – member states have been closing and now opening their borders with less than perfect coordination between them, disrupting lives and economic relations.

“In economic terms the disparities are likely to grow: Germany for instance has taken up almost half the allotments envisaged by the Commission under state aid exemptions, and has been extremely surefooted and quick in its actions, with about 35 percent of its GDP allocated to containment and recovery initiatives, leaving the rest of Europe flatfooted. 

“The US economic programme of over $3 trillion has meanwhile been flying for over the last two months.

“Eventually no doubt, the EU will achieve a common programme on how to deal substantively with a future pandemic, but it will likely be an assembly of compromises, which to be fair when they are put together, usually do keep the show on the road.” 

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