The EU’s ‘Hamiltonian’ moment?

19 May 2020

President Macron and Chancellor Merkel made history this week by publicly calling for a joint EU-backed recovery fund to boost the European economy amid the COVID-19 pandemic

Barry Colfer
Editorial credit: 360b / Shutterstock.com

As a joint EU-backed recovery fund is prepared, both leaders signalled support for the European Commission to borrow up to half a trillion euros to be distributed to member states to support their Coronavirus responses. For Chancellor Merkel especially, in the twilight of her chancellorship, this shift in posture marks an important milestone in the EU’s constitutional development. While the mechanics of how the money would be raised and dispersed remains unclear, the increasing willingness of member states to share a proportion of the economic burden of COVID-19 at EU-level drew Henrik Enderlein, from the Hertie School in Berlin, to claim that we might have just seen a ‘Hamiltonian moment’ for the EU.

Crucially, any such resources would likely be available to member states and regions as grants, and not loans, and it is unlikely that such grants would be contingent on punitive reforms, as was the case with the EU-backed bailouts of heavily indebted EU member states following the onset of the 2008 financial crisis.

The Franco-German proposal still needs the support of the twenty-five other member states and the European Parliament, and the ‘frugal group’ of northern member states (including Austria, Denmark, the Netherlands and Sweden) will still need convincing, but especially Germany’s shift in tack remains hugely relevant.

For decades, theorists, politicians and citizens from across the progressive spectrum have identified the lack of social transfers and economic burden-sharing in the eurozone and at EU level as the major shortcoming of the European project – or what Guy Verhofstadt and Daniel Cohn-Bendit have dubbed the (at least potentially) ‘lethal incompleteness’ of the eurozone. Many thinkers in the 1980s and 1990s believed that these gaps would be filled naturally, as the prospect of doing otherwise would be unthinkable, but the excruciating experiences in Greece, Ireland, Portugal and elsewhere following the 2008 crisis, where financial rescue was contingent on far-reaching structural reforms and austerity, lay bare the fact that these gaps persist.

Fundamentally, the motivation to visit such austerity on beleaguered member states ten years ago was the fear of ‘moral hazard’ – that is, a lack of incentive for member states to guard against future risk if rescue funds were seen to be obtained too easily. The crushing cuts and reforms of the Troika (of the EU, ECB and IMF)-backed bailouts were deeply unpopular, and visited deprivation and hardship on already struggling societies, and stoked support for anti-EU sentiment in many member states. It is well documented how, in the heady summers of 2014 and 2015 especially, the political consequences of these measures shook the eurozone, and the European project itself, to its core. While the debate around the fairness, logic and human cost of this EU-backed austerity will rage for generations, the case of COVID-19 carries much less baggage. While individual policies, politicians or bankers may be apportioned blame for poor monetary policy decisions and the subsequent sovereign debt crisis, it is much more difficult to apportion blame, or to punish citizens, for poor public health infrastructure or misfortune.

For progressives, the prospect of EU-level financial support for member states as they work to contain the pandemic should be seen as good news. Such measures have the scope not just to fight inequality and deprivation, and to make people’s lives better in extremely difficult circumstances, but it can also undermine support for anti-European populist nationalism, as the EU will be actively advancing the ‘well-being of its peoples’, while promoting ‘solidarity among member states’, as envisaged in Article III of the Treaty on European Union.

While it’s hard to identify anything positive coming from the COVID pandemic thus far, there may be positive aftershocks. Jean Monnet, a founding father of the EU, famously argued that ‘Europe will be forged in crisis, and will be the sum of the solutions adopted for those crises’. If this pandemic pushes the EU and its member states in a more progressive direction – that supports citizens and builds solidarity – this can be welcomed as a small mercy, and may give some hope for Europe’s future.