The European Union’s invisible cracks are widening

By Ron Ridderbeekx, Senior Counsel

Largely unnoticed in the UK, an almighty row has broken out in the European Union – and for the first time in my memory, leaders are openly and seriously warning that the future of the EU itself is on the line.  

At the European Council video conference last week, Dutch Finance Minister Wopke Hoekstra refused to agree to the issuing of EU-wide debt (called Corona Bonds), proposed by countries including Italy, Spain and Portugal to fund the recovery from the pandemic. He also insisted the EU investigate why certain Member States struggle to exercise fiscal prudence and fail to stay within EU budget deficit rules. Hoekstra has since expressed regret at the words used to make his point, but has stuck to his position. The Dutch government is now proposing a voluntary Corona fund and has promised to contribute up to €1 billion.

The Portuguese Prime Minister called the Dutch attitude ‘repugnant’, while the Spanish leader warned that the European project is at stake if the EU proves unable to muster solidarity. The Italian Prime Minister called the Dutch ‘unethical’ and ‘lacking solidarity’, whilst Lega leader Salvini called the EU ‘a den of snakes and jackals’, vowing to readdress EU membership after the Corona crisis. It is understood even German leader Angela Merkel now worries about EU stability.  

The row reignites unresolved tensions between Northern and Southern Europe stemming from the financial crisis and the migrant crisis a few years later, both of which Southern European states feel they have borne the brunt of.  Northern European countries are adept at balancing their budgets and using austerity during crises rather than debt finance as Southern European nations tend to. As a result, EU or Eurozone bailout money flows from North to South, along with a wagging finger and an insistence on learning lessons.  

In 2017, another Dutch Finance Minister and then Eurogroup Chairman, Jeroen Dijsselbloem, caused tension by saying that “if you spend your money on booze and women, you shouldn’t apply for welfare”. He denied that his words referred to the North-South divide but it’s hard to see what else he was talking about. He later ruled out a bailout of the Italian economy.

In this current crisis, a group of four countries – The Netherlands, Germany, Finland and Austria – have been termed ‘the frugal four’ given their aversion to debt finance. It is no surprise that they are the ones who are putting the boot into the Corona Bonds proposal. To focus blame solely on The Netherlands is unfair, although it has itself to blame for its clumsy choice of language.  

What is fascinating is the absence of visible leadership from Council President Charles Michel and Commission President Ursula von der Leyen. It is surely their challenge to get the EU 27 back in the same tent and it is a major test of their leadership. Their other headache is that this week, the Hungarian Parliament gave Prime Minister Victor Orbán the power to rule by decree for an indefinite period. The risk of an emerging dictatorship in the EU ranks must be distinctly uncomfortable. However, like every other leader, they too must lean into their discomfort and confront difficult problems in ways that may not feel natural to them.

I am wondering how this tension among EU Member States carries forward into the future relationship talks between the EU and the UK. The Corona crisis has put those negotiations on hold for now. The Daily Telegraph reported on 17 March that the UK Government is preparing to seek an extension to the transition period, despite the Prime Minister’s ‘ban’ on talk of an extension. Having seen the government’s preparedness to adopt previously unthinkable economic policy in the face of the Corona crisis, it can justify a change in stance on Brexit too and the logic is compelling.

While Michel Barnier has so far made EU unity look easy when working out the Withdrawal Agreement, this looks a lot less straightforward as the process moves to the future relationship. He must have been worried about unity when he warned the UK off holding bilateral talks with Member States and stick to negotiating with Brussels. So when the time comes, will the UK try to exploit divisions or respect the role of the Commission in representing Member States?

The Corona crisis itself will change the nature of the negotiations. Both sides had expected to negotiate against a stable economic backdrop and that is no longer true. The common purpose of recovering from the economic crisis caused by the virus may allow previously impossible compromise for the sake of helping the recovery on both sides.  

I never thought I would find myself wishing that Brexit was once again the big issue of the day, but in comparison to the Corona crisis, it seems like a pleasant walk in the park. Oh, how I’d love to have a walk in the park (which, of course, I’m allowed to – but only once a day…).


Photo credit: Pixabay.

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