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COVID-19 and the 3 Es - Europe, EU, and its Economic Stimulus

Writer's picture: Youth Policy ReviewYouth Policy Review
Aug 19, 20204 min read

Europe - the place that has it all, flickers with a unique charm. One might want to “take a chill pill in Ibiza”, stand and stare at the Alps, or simply wander in the streets of London. But, as with the rest of the world, a new normal lurks on the horizon leaving most nations reeling to restore their socioeconomic status. Countries leading the charts of the highest fatality rate belong oddly to Europe (Italy, Spain among others) begs the question - why the continent with richer coffins, modern pursuits and most importantly, the largest confederation in place?


ITALY


A deft touch of homeliness and a rich legacy backs the 8th the largest global economy - Italy. Even pre-pandemic, its two major sepoys - the Leaning Tower of Pisa and the economy - were leaning downwards. With unemployment rates well within double figures for over a decade, and public debt equaling 132% of the Gross Domestic Product (GDP), it’s safe to say Italy never truly recovered from the Great Depression.



Italy’s surge | Source: statista.com


Mistakes were aplenty. Thousands of citizens in the southern areas were contaminated in a mass exodus in response to the leak of a lockdown decree. Industrial lobbying was prioritized to minimize losses. A football match in Milan, boasting of over 40 thousand attendees is being termed as a ‘biological bomb’. Additionally, 23% of Italy’s population is over 65 years. Overwhelmed hospitals, insufficient protective equipment, and hiccups in local-level data collection paint a stronger picture of systemic failure in the face of COVID-19. Combining this with major funding cuts in the public health system, the country was set for a disaster. Therefore, extremely high levels of in-coordination and incompetency, grave politicization and decentralization not only hampered pandemic response, but it also led to blame games and governors turning their backs on central decisions.


SPAIN


Boasting of now-stranded beaches and swiftly afoot on the path to development, Spain was struggling with a 13.7% unemployment rate pre-pandemic. With a new minority socialist government in power, the story of Spain’s failure eerily resembles many others - the country undermined the strength of the evil virus. While at a few hundred cases, people actively participated in Women’s day gatherings (with over 60 thousand people in attendance). Delayed order implementation allowed people to move to their beach homes after institutions closed, and chilling spots still overflowed in a state of deceptive normalcy. Within a week, fatalities rose exponentially and soon enough underprepared old-age homes were folded into contraction. Despite a late but stringent national lockdown, the healthcare system was in tatters due to mismanagement and lack of cohesive instructions.


The joint failure of the European Union


With turmoil gripping constituent members, the European Union seemed to be out of the picture for quite some time. With public health being a major component of Europe’s suffering, the EU is heavily under the scanner for crisis management.


In addresses from well within the onset of the COVID era, the pandemic evaded mention in all of the EU’s addresses. COVID was upgraded to the status of a somewhat-crisis as late as March. Meanwhile, the EU laid focus on the migration crisis across the Turkish border, something that could have been pushed down their priority list. Lack of basic statistics for medical equipment availability portrayed stark inabilities of the EU. 4 health ministers resigned amidst the crisis, and flights and car travel weren’t prohibited till late. Despite these mainstream mistakes, the attempts of the powerful nations (France, Germany) to selfishly save only themselves planking zero cooperation came to light. When Rome activated the ‘Civil Protection Mechanism’ calling for help from other members, no member stepped in. Von der Leyen, president of the EU famously stated that “Europe needed an all-for-one spirit, but received an only-for-me response.”


The Grand Economic Stimulus


After 4 days of haggling, the Union came up with an unprecedented 750 billion Euro package on 21 July to bolster the worn down members. It is historic in the way it will be funded - mutualized debt. The EU countries will raise large sums by selling bonds collectively, which will then be disbursed not just in the form of loans, but also non-repayable grants, 360 billion and 390 billion, respectively. The Frugal Four were reluctant and advocated for fewer and only loan handouts to the south, who contribute relatively lesser to the EU. But this helps those nations with already humongous debts and reliance on tourism, components that now make loan repayment difficult. The deal merit 140 billion from Spain and 209 billion from Italy. A 7-year 1 trillion regular budget has also been announced.


As reports of the welcome move emerged, stocks peaked in the market. The package overshadows the post-Great Depression and WWII reforms and represents unification and strong decision-making prowess by the fragmented Union. However, there was a backlash poured in from the Bank of America who said “it's too little, too late” in contrast to US’ $2 trillion stimuli.


There have been marked budget cuts on climate change and research investment, compromising sustainable development. The division of the pay out will be spread over 3 years, which might stretch recovery. The proposed grants-loans ratio of 2:1, i.e. 500 billion in loans and 250 billion in grants would have been better.



Europe is in an irrefutable turmoil laced with an anticipated 8.3% economy contraction. Hopefully, the stimulus focuses on pressing issues like healthcare, employment, and digital transformation, and comes in handy for the pandemic-clad continent. After Britain's unfortunately-timed exit, the leash rests with the EU, and they must overcome the factions to zero down on what their new normal should look like.


Definitions -

European Union (EU) - EU is a political and economic bloc of 27 member states in Europe, with 18% of the global nominal GDP.

Frugal Four - The Frugal Four, formerly sometimes the Frugal Five, is an informal cooperation among like-minded fiscally conservative European countries, including Austria, Denmark, the Netherlands and Sweden.


References -


By -

Sarthak Agarwal


Still a rookie to the sphere, trying to write about public policy and football, together!


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