What has happened, and continues to happen, in Europe and in particular in the euro area, is something strange, incredible and a travesty
Antonio Lettieri is Editor of Insight and President of CISS – Center for International Social Studies (Roma). He was National Secretary of CGIL; Member of ILO Governing Body,and Advisor of Labor Minister for European Affairs.(email@example.com)(Antoniolettieriinsight.blogspot.it/)
Edited by BRAVE NEW EUROPE
Among the unfortunate characteristics of the coronavirus pandemic is its egalitarian nature. It has affected all continents, and especially the most disadvantaged as in the case of many African and South American countries. However, not only were the effects not the same between countries with very different geographical locations in the world but even between the countries of the northern hemisphere that are generally more capable of a reaction being economically well endowed.
The case that, initially, was considered exemplary was that of China which proved capable of keeping the pandemic under control in the first months of the year in which it occurred. But it was not an isolated case. We have seen small and large countries react successfully – from South Korea to Japan and then New Zealand, as well as Australia, and Israel – even though they abandoned the citizens of the Palestinian territories to the mercy of the pandemic.
Today the case with the highest number of deaths is that of the United States. But they have learnt from the errors of Donald Trump. One hundred million citizens have been vaccinated in a few weeks and Joe Biden announced that another one hundred million will be vaccinated this spring. Herd immunity will thus be obtained. The result is important not only for the success in the current management of the pandemic. Still a very real threat remains: the virus is already changing its nature and over time, as happened in South Africa, the treatments underway could prove inadequate, multiplying the infection and the risks for human life.
The cases we have mentioned are particularly relevant, showing the possibility of dealing with the pandemic with success. And it is unequivocal that not trying all possible means, when they exist, is an unacceptable and tragic political failure. The EU failure is as indicative as it is unfortunately exemplary.
Boris Johnson underestimated the risks in an almost grotesque manner in the spring of last year. Then, unfortunately for him, he suffered a severe case of the virus. He came out personally exhausted. But above all, he came out of itchanging the political orientation of the government by 180 degrees, placing immunisation at the centre of political initiative. The strategy has been successful. The UK is currently reporting 5,000 new cases daily, while France is registering 50,000 and Germany 25,000.
The comparison with what has happened, and continues to happen, in Europe and in particular in the euro area, is something strange, incredible and a travesty. In chronological order Italy, then Spain, Germany, France, not to mention Belgium and the Netherlands, continue to be the most affected among the economically advanced countries.
The reason is as clear as the failure of the centralized intervention policy for which the European Commission was responsible. Since the summer of 2020 it was supposed to provide the necessary vaccines for the whole of the EU.It was cast in the typical EU liberal democratic fairy tale of fairness and unity. None of that national interest stuff. Unfortunately Germany’s former Defence Minister, Ursula von der Leyen, who Merkel had sent to Brussels as Commission President to avoid corruption charges in Berlin – the same sort of corruption one is now seeing in the German PPE acquisition by members of Merkel’s and von der Leyen’s Christian Democratic Party.
But there was no happy ending to this EU fairy tale. Instead, the failure was total. Some of the richest and most advanced countries have been hardest hit. The pandemic that seemed to be tamed exploded violently between the end of the year and the beginning of the new in Italy, France, Spain, Germany, to name the most important countries of the eurozone – about two hundred fifty million inhabitants, without any significant reaction, besides the unfounded assurances coming from the Brussels bureaucracy and Ms Merkel’s claims that all was EU tip top.
In the European Union, large quantities of vaccines of various origins are produced – including some unknown production sites such as in the case of a factory near Rome. The fact that they were exported to countries that badly needed them, such as in the case of Africa, may be understandable and even desirable. But why hundreds of millions of citizens of one of the richest economic areas on the planet, have remained deprived of the necessary vaccine without plausible reason is inexplicable. It is the failure of the Brussels bureaucracy that governs the fate of the European Union. The worst aspect is that no one seems to be terribly surprised.
Nor do things appear to be in a better state with regard to the EU economic recovery plan, Next Generation EU. The Brussels authorities have allocated 750 billion euros available to the countries of the European Union to deal with the economic consequences of the pandemic. In this context, Italy and Spain are the two countries that will receive the most, that is approximately 350 billion euros. Since the figures are abstryt, the only way to gauge this amount is to make some useful comparisons.
The two nationss account for a total population of about one third of the inhabitants of the United States. Joe Biden requested and obtained, in addition to the investments decided in Trump’s time, another 1900 billion dollars. The total sum, in terms of additional public spending destined to fight the pandemic, is close to five trillion dollars, just under a quarter of the American national income. Adding to this expenditure, he has proposed the investment of two trillion dollars to reshape US infrastructure in the course of next eight years, considered the biggest public investment programme in the world. This will be accompanied by higher corporate taxes. The plan, according to an administration official, would “revitalise our national imagination” and put “ millions of Americans to work right now” . (Financial Times, “Biden to unveil $2tn projects and corporate tax rise”, 1 April, 2021).
Considering just the US amount mobilized in reaction to the pandemic, the aggregate sum destined for Italy and Spain, relative to their smaller population, is 10 percent. The difference is evident. But this is not the most important aspect. The appropriations decided in the United States are part of an expenditure that has already been partially carried out, partly to be carried out in the coming months.
On the contrary, the allocation decided in Brussels concerns an amount that will be distributed over six years on the basis of the evaluation that the European Commission will give of the spending programmes proposed at a national level. These expenditures have already been fundamentally determined by the scheme decided in Brussels: essentially:, investments in climate and advanced technologies. The difference between the slow and limited economic support of the EU for its member states to the immediate and massive interventions decided in the rest of the world is sensational, not to mention the projected results.
China, the first to be hit by the pandemic, will increase its GDP by about 8 percent this year, the highest in many years. All other countries for which an adequate public intervention has been decided will return to pre-pandemic income between the current year and the beginning of the next. In the case of Italy, according to the government forecasts, we will have to wait until at least the end of 2023. In other words, it will mean the return to the income of 2007, already five points lower than at the beginning of the century. And this in a context of rising mass unemployment already higher than 10 percent and that reaches 20 percent in the South of Italy, the highest in the Eurozone.
There is no mystery about these trends of the crisis. While the pandemic has reduced national income by about ten percent, there is no other way to recover from it than by relaunching public investments and those in support of private ones consistent with a general plan of economic recovery and increasing employment.
There is no doubt that Mario Draghi has, after eight years of experience in the management of the European Central Bank, an extraordinary competence in the monetary and financial field. Why doesn’t he implement the needed financial and economic measures coherent with the policies adopted in the economically advanced countries of the rest of the world? The argument of the rising public debt is not convincing. Even Germany has broken with its much touted Black Zero no new debt policy.
Rising debt is inevitable and is what happens in all nations in the midst of a crisis. A public investment policy can in fact be favoured in current circumstances by the extraordinary availability of inactive savings buried in the coffers of banks with interest rates close to zero if not negative, which remain unused. These are favourable circumstances for a major public investment plan intended to revive growth.
The only explanation for an unreasonable behaviour is submission to the choices made by the European Commission led by Germany. A ruinous policy with incalculable economic and human damage destined to affect the fate of the eurozone.
Over the past decade, the euro area has experienced the lowest growth in national income and the highest average level of unemployment in the developed world. Sometimes crises serve to make us aware of past mistakes and to change direction decisively. It may be that radical change may occur in the coming months under the pressure of the disastrous effects of the pandemic and the inadequacy of the measures adopted and announced to limit its immediate and long-term consequences.
Politics is about recognizing mistakes and making necessary changes. The British example we referred to was a positive example of this , but this was only possible thanks to Brexit. Change is always possible. But for now there is no evidence of this in the EU. Yet the experience of the last decade in the euro area of the lowest growth and the highest average unemployment among advanced countries, along with growing inequality and poverty should push any normal government in the direction of radical change.
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