But these major steps are still only temporary. Whenever the pandemic passes, countries will emerge with their economies ravaged, uncertainty scaring off investors, unemployment spiking and public debt skyrocketing. The widely derided austerity measures of a previous era are now political suicide for policymakers. More stimulus — closer to the scale of $2 trillion now being spent by the United States — will be needed.
To do that, nine pandemic-hit governments in the euro zone — led by Italy, Spain and France — proposed joint bond issuance, which would combine securities from different European countries. “Debt would be mutualized and not sit on any country’s balance sheet, and the funding cost would be lower than it would be for most highly-indebted governments,” explained Pierre Briancon in Barron’s. “The proceeds would be spread among eurozone members according to their actual needs.”
These “coronabonds,” as they have been branded, were supposed to be an instrument of unity at a time of continental crisis. Instead, Germany, the Netherlands, Austria and Finland — dubbed in media as the “frugal four” — shot them down Thursday, opposing the massive structural retooling this would entail and irked by having to throw in their lot with countries they view as less prepared for troubled times.
“It would mean that you would cross the line of the Rubicon, into a euro zone which is more of a transfer union than was envisioned by its creators,” center-right Dutch Prime Minister Mark Rutte said. “I cannot foresee any circumstances in which we would change that position.”
Rutte’s finance minister, Wopke Hoekstra, even suggested that Brussels should investigate why some other countries may be financially unable to weather the impact of the pandemic. Officials in Spain and Portugal hit back, arguing that Hoekstra’s approach was “senseless” and “repugnant.”
Spain’s foreign minister Arancha González tweeted that the E.U.'s member states were all in the same “boat together,” had “hit an unexpected iceberg,” and that now was not the time for discussions about who gets first- and second-class tickets.
But grievances from the decade past still linger. “The spat has reopened painful old wounds. In the early stages of the euro zone crisis, the Dutch were among the most vocal opponents of the initial Greek ‘bailout,’ and demanded draconian austerity measures in return for the emergency loans,” wrote David Adler and Jerome Roos in the Guardian. “The former Dutch finance minister Jeroen Dijsselbloem gained widespread notoriety for his penny-pinching in the Greek debt negotiations, at one point appearing to suggest that his southern European neighbors had wasted their money on ‘booze and women.’”
But the present crisis, argued Benjamin Haddad of the Atlantic Council, is not like the preceding ones for two key reason. “The first is the external nature of the shock affecting every country. No one country can be blamed for bad budgetary management,” he told Today’s WorldView. “Furthermore, the strategic context has dramatically shifted: This time the U.S. is not leading an international response, and China’s authoritarian model is more assertive both within the E.U., and in its neighborhood.”
The Trump administration is sheltering under the bunker of “America First.” China and Russia have opportunistically swooped in with shipments of aid to Spain and Italy where other European partners fell short. Far-right populists point to the disagreements within the bloc as evidence of its inefficacy and weakness in a moment of peril.
“The image that Italians have of the Netherlands has been drastically polluted in just a few days,” former Italian prime minister Enrico Letta told Dutch newspaper De Volkskrant.
The current dispute is yet another illustration of the philosophical divides over the future of the European project. French President Emmanuel Macron, one of the loudest voices for a more united Europe, has led the charge, seeking to build European institutions that would have broader powers to handle crises like the pandemic.
The coronabonds, wrote economist Philippe Legrain, would “give the eurozone greater geopolitical reach and provide greater protection against President Donald Trump’s abuse of the dominance of the US dollar for harmful political ends.” It would also prove that “European solidarity exists,” according to Legrain.
“What worries me is the illness of every man for himself,” Macron said in an interview with Italian news media over the weekend. “If we do not show solidarity, Italy, Spain or others would be able to say to their European partners: Where have you been when we were on the front line? I do not want this selfish and divided Europe.”
Stung by the regional backlash, Hoekstra acknowledged on Tuesday that he may have shown “too little compassion” for his European partners to the south. But while he said the Netherlands would put in “more than its fair share” in some future European support program, it would not back debt-sharing on a continental level.
“About coronabonds or eurobonds, or whatever it is called, that’s just not prudent; it’s a solution for a problem that does not exist now,” he said.