EU integration takes a hit

This violation of the ideal of open borders within the EU was not the initiative of populist parties. On the contrary, it was predominantly the work of mainstream governments.

It was followed by the suspension, or loosening, of some of the key mechanisms for EU integration. These include strictures on state aid, free movement and fiscal limits. A plan to issue mutualised debt to help finance measures to contain the pandemic – so-called ‘corona bonds’ – were also shot down.

The trend was exacerbated when the German constitutional court suggested that it, rather than the European Court of Justice, should have the final say in legal matters related to Germany. This was an assertion of German sovereignty over EU-level sovereignty.

A striking riposte from Germany and France came in response to these setbacks. The leaders of the EU’s two key member states proposed a €500bn regional recovery fund.

The importance of the proposal was not its size – which many criticised as too small – but its embodiment of the principles of common borrowing and the EU acting as a transfer union. Accepting these previously taboo propositions was a big step for Germany’s leadership to take.

European integration’s most avid supporters were ecstatic. Olaf Scholz, Germany’s finance minister, talked of approaching a “Hamiltonian moment”. That was a reference to the movement towards economic union in the early days of the US.

But such overblown claims are premature. The proposal needs the agreement of all 27 EU member states to be accepted. It is hard to see it coming into force except in a highly diluted form.

On balance, the EU looks set to come out of this crisis weaker rather than stronger.

It is true that European elites – at least within the member states – are overwhelmingly committed to the EU. Germany’s willingness to relinquish two of its key principles in the recovery fund proposal is evidence of that.

But the forces pulling in the opposite direction look stronger. That was the significance of the shift back towards national borders and national measures at the start of the pandemic. At a time when greater unity might be most expected, the opposite turned out to be the case.

If anything, the economic responses to the pandemic are likely to exacerbate this trend. Some countries are likely to take a much harder hit than others.

Euro-optimists are likely to find their hopes cruelly dashed.

Daniel Ben-Ami, Deputy Editor +daniel.ben-ami@ipe.com