Coronavirus has deepened Europe’s existential crisis despite openings

As the European Union struggles to emerge from COVID-19 lockdowns, political realities threaten the bloc’s foundations.

After a three-hour video summit, the European Union’s 27 leaders failed to make any progress toward agreement on a desperately needed fiscal-stimulus package for the bloc after the COVID-19 pandemic. Christine Lagarde, the president of the European Central Bank, explicitly warned that the EU’s economy was in a “dramatic fall” due to the COVID-19 crisis.

The coronavirus pandemic has clearly presented the European Union with its greatest existential crisis since inception in 1957. Parts of Europe are just starting to emerge from near economic paralysis with Depression-era like conditions that risk further deterioration.

European unity is required from the bottom-up and top-down to ensure the union’s long-term survival. More than ever, Europe’s internal weaknesses and divisions have been completely exposed and remain at risk of being exploited by global players, particularly China.

In a recent European Union report on disinformation in the pandemic, Chinese pressure succeeded in the removal of language accusing China of running a “global disinformation campaign to deflect blame” on COVID-19’s spread. Further interference and manipulation of Europe’s internal challenges is the least that can be expected for the foreseeable future.

A bold Franco-German proposal for a 750 billion euro ($839 billion) recovery fund was an overdue attempt to seize Europe’s leadership initiative. There was a general failure to do so since the pandemic’s outbreak began in Italy in February. There was no sense of European solidarity one would expect at a deep crisis crossroads. Basically, every member-state was forced to fend for itself. Europe’s inability to rise to the historic occasion will not be forgotten anytime soon.

The pandemic has further exacerbated the traditional divisions between a largely more frugal north and heavily indebted south. This has been crystallized by the initial debate surrounding the proposed recovery fund.

The instincts of Europe’s Frugal Four – Austria, Denmark, Netherlands and Sweden – was to create a fund financed by loans only. Fully mindful of the gravity of the economic crisis on coronavirus-stricken countries, particularly Italy and Spain, German Chancellor Merkel clearly pushed for a grants-based fund to preserve long-term European unity. Even Germany’s leading fiscal hawk, former Finance Minister and current parliamentary president, Wolfgang Schauble expressed support for the non-refundable loans plan.

If a grants-based rescue package is finally agreed, which requires unanimous consent from all 27 EU member-states, there is no guarantee it will not be challenged legally, politically or economically in the long-term. It still risks derailment by potential conflicts involving member-states, national and EU-level institutions and increasingly hostile anti-EU public opinions.

Support for EU membership has hit historic lows in many countries - particularly in Italy, the eurozone’s third largest economy and traditionally one of the staunchest pro-EU member-states.

Furthermore, Germany’s highest court astounded Europe in May, and established an unprecedented milestone, by ruling that the German government and the European Court of Justice failed to properly examine a bond-buying program by the European Central Bank. This marks the first, but possibly not the last, instance of a national body challenging a decision by a higher level EU institution.

A Pandora’s Box has been cast wide open that could test the EU’s foundations, and possibly bolstered and accelerated by the pandemic’s fallout - including a potential second viral wave in autumn, or potentially before.

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Marco Vicenzino is a geopolitical expert and strategic business advisors to senior executives operating globally. He is a regular speaker at international conferences and provides analysis for leading global media outlets. He is a graduate of Oxford University and Georgetown University Law Center.