Christopher Vecchio, Senior Market Analyst at financial market news portal Dailyfx.com, was speaking on the day a European Council meeting of leaders of the EU27 discussed the unfolding situation, and specifically a multi-billion euro rescue package aimed at mitigating its impact, agreed by the Eurogroup of foreign ministers of the individual member states earlier this month. The EU has faced sharp criticism over its response to coronavirus and Mr Vecchio said the bloc’s track record when it came to crisis management was less than impressive.
After a decade of stagnant growth and failure to fully recover from The Great Recession and the eurozone debt crisis, the European Union is ill-equipped to deal with the task at hand
He said: “After a decade of stagnant growth and failure to fully recover from The Great Recession and the eurozone debt crisis, the European Union is ill-equipped to deal with the task at hand.
“The coronavirus pandemic demands coordinated efforts across institutions, borders, and boundaries, and in many respects, the EU has failed as its member states have failed one another.”
Until yesterday, when it was confirmed France and Germany had donated the most PPE to Italy, Europe’s hardest-hit country, the two top international donors had been China and Russia, Mr Vecchio pointed out.
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He added: “And it was only on April 9, after all, that the Eurogroup agreed to a rescue deal that clocks in at €540 billion, in part made available through the well-worn European Stability Mechanism (ESM).
“But the coronavirus pandemic has exposed an old wound: the desire by the less fiscally stable member states to have a federalised European budget.”
Mr Vecchio explained: “Germany, Austria, and the Netherlands remain opposed to jointly-issued debt among member states, otherwise known as ‘Eurobonds’ – just as the bloc of northern member states did throughout the crisis of the past decade.
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“As the coronavirus pandemic has exposed the fragilities of globalisation – Western economies’ key medical supply chains are abroad – there will likely be a ‘re-shoring’ over the coming months and years; a natural drift towards isolationism and nationalism.
“And so, the European Union may be nearing a breaking point.
“A lack of a federalised response mechanism, blockaded by the more fiscally stable members of the EU, may be the spark that forces countries to turn inward even faster – and tear the union apart.”
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In a letter of invitation to individual EU27 leaders sent on Tuesday, European Council President Charles Michel wrote: “At our last videoconference, we also tasked the Eurogroup in an inclusive format to present proposals to tackle the socio-economic consequences of the crisis.
“On April 9, the Eurogroup agreed on a package worth €540 billion, with three important safety nets for sovereigns, for private companies and for the protection of employment.
“We should give the go-ahead to these important initiatives and insist on them becoming available as quickly as possible.
“The aim should be for these three safety nets to be in place and operational by June 1.”
Mr Michel stressed: “It is critical that we discuss these issues openly among ourselves and urgently move ahead in order to make progress.”
One person who was not happy with the Eurogroup’s proposals was Italy’s Prime Minister Giuseppe Conte, who favours a system of eurobonds, in this case nicknamed coronabonds.
Mr Conte, who described the current plan as “totally inadequate”, warned: “At the European Council I will not sign anything until I have a set of measures that are adequate to tackle the challenge we face.”
Northern European countries, especially the Netherlands, led by Prime Minister Mark Rutte, are vehemently opposed to debt mutualisation.
Following the ratification of the European Union Withdrawal Act in January, the UK is no longer represented on the European Council.
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