Policy Briefs

R. Perissich: Logic, facts and common sense in the time of Covid-19

European countries have faced the Covid-19 pandemic unprepared and on the basis of scant scientific knowledge about the virus. After a lot of hesitation and muddling through, most of them seem to be converging towards something that could be called “the Italian model”: general lockdown of activity and confinement of the population with the objective of flattening the contagion curve and avoiding unbearable pressure on understaffed sanitary services. While the search for treatment and a vaccine accelerates, massive testing is being developed. This is still very uncertain, but some results can be seen. The EU institutions have been criticised for not having acted collectively; however, it is difficult to see what could have been their value added absent credible scientific expertise. More worrying is the fact that unilateral and uncoordinated national decisions have affected two cornerstones of the building: the free circulation of people and of goods. The epidemic and the lockdown of most economic activity is threatening with a recession much more severe than the one that followed the financial crisis of 2008. The ECB has reacted by massively increasing both its QE and the liquidity that it provides to the banking system. The EU has also suspended the rules of the SGP and of the control of state aid. This allows governments to pour almost unlimited amounts of money into the economy. This is necessary, but since the fiscal and structural situation of the member states is very different, there is the risk that national actions could increase the divergence between the member states to a point that would be close or beyond acceptable limits. Some kind of common action is therefore necessary, but it is being negotiated against the background of a persistent breakdown of mutual confidence as well as a fragile domestic political situation in several countries. A bridge has to be found between two incompatible narratives: rules without solidarity and solidarity without rules. On those bases, this paper explores the options that are realistically available to negotiators.

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