#StrongerTogether, COVID Rescue Funds, and the Dream of True European Solidarity: An Interview with Diogo Magalhaes
This is part of a special series on the Novel Coronavirus (COVID-19) pandemic.
In wake of the COVID-19 crisis, the announcement of the EU financial relief package and the 70th anniversary of the Schuman declaration, I spoke to my friend and author of On law and US[1] and I Dream of Europe,[2] Diogo Magalhaes, about isolation in times of crisis, the true nature of (EU) solidarity, and the strange radicalism of ideas such as COVID bonds.
Here is some context about the COVID-19 solidarity fund and the 70th anniversary of the Schumann declaration and Europe Day:
Famously the Schuman declaration, which proposed the creation of the European Coal and Steal Community of May 9th, 1950 read: “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.”[3]
In light of the COVID-19 measures and responses, the European Union Solidarity Fund (EUSF), which has been in operation since 2002, has been extended to encompass major public health emergencies, allowing for up to €800 million to be allocated to countries hardest hit by this health crisis. In addition, on March 18th, the ECB decided to launch a EUR 750 billion Pandemic Emergency Purchase Programme (PEPP), to expand the range of eligible assets under the Corporate Sector Purchase Programme (CSPP) and to ease the collateral standards. These measures are aimed at ensuring that all sectors of the economy can benefit from supportive financing conditions that enable them to absorb the COVID-19 shock.
Last April 9th, the Eurozone finance ministers agreed on a 540 billion-euro rescue plan―the so-called solidarity plan. The rescue plan encompasses a pan-European guarantee fund of up to €200 billion created by the European Investment Bank (EIB) towards bridging loans, credit holidays, and other measures designed to alleviate liquidity and working capital constraints for small and medium-sized enterprises (SMEs) and 100 billion in a new and temporary fund for workers, to support to mitigate Unemployment Risks in an Emergency (SURE). The plan was officially endorsed by EU leaders on April 23, 2020. The method of funding this plan was unclear.
Then, last May 5th, the German constitutional court passed a bombshell ruling criticizing the way the ECJ rationalized the proportionality of the ECB’s Public Sector Purchase Programme (PSPP) and called the ECJ’s ruling in this regard “ultra vires.” This decision has been criticized by both German Chancellor Angela Merkel and the EU Commission president, Ursula von der Leyen.
Remarkably, on May 19th, leaders of the member states, in particular Angela Merkel and Emmanuel Macron, endorsed the liability of the EU solidarity fund being added to the EU’s own budget―making it the first true EU fiscal solidarity mechanism. To this Angela Merkel said, “We will have to act European in order to get well out of this crisis.”
—Juliane Mendelsohn for EuropeNow
EuropeNow The recent political decision to let the EU itself carry the liability for the solidarity fund introduces a new level of fiscal transfers and of burden sharing. It feels like a breath of fresh air and true reinvigoration of the European spirit. What is your instinctive feeling towards European solidarity today?
Diogo Magalhaes This was welcome news. This agreement between Angela Merkel and Emmanuel Macron represents an important and (until recently) thought unlikely, paradigm shift by Germany with regards to debt mutualization in the EU. It really is an important statement and act of true solidarity and I think very much what European citizens wanted to see in times like these. Let’s not forget that there have been impactful acts of solidarity taking place in the EU every day. We saw hospitals in Germany, Austria, and Luxembourg treating critically ill patients from other member states. We saw nurses and doctors being dispatched from Romania and Norway to Italy. We saw countries sharing resources and medical equipment to treat patients but also to protect health workers and citizens. We saw an impressive joint coordination between the EU and its member states in the repatriation of close to 60 thousand stranded EU citizens. And finally, let us not forget how across Europe and all over the world, people like you and me still feel European, and that we belong to each other, now more than ever.
EuropeNow If people have really felt that way, then I suppose the bitter question is: why did this take so long? I am speaking of course of the past crisis of 2008, but also the past two grueling and painful months. The first reaction to this very crisis was to see borders go up again. Suddenly, in March, Italy was Italy again. While help did come―from other EU members but also from Cuba―why could we not have acted as a unified Union from the start?
Diogo Magalhaes I wish we had. I think we are learning that the European project still requires more from all of us: more unity, more compassion, and more selfless solidarity. We are tired of waiting and tired of understanding that some changes come too slowly. In times like these, I try to recall one of my favorite EU quotes. “We all know that these challenges, which are being felt throughout Europe with equal intensity, can only be effectively met through solidarity. (…) only Europe as a whole is capable of taking the necessary action which is beyond its individual members in isolation.” Are you familiar with this quote?
EuropeNow It is a good quote, but I don’t believe I am.
Diogo Magalhaes It is a quote by Simone Weil in 1979.
EuropeNow Wow. So change really does take a lot of time, but what is the rationale behind things as they stand today?
Diogo Magalhaes The easy, and technically correct, answer to your question would be to say that the relationship and interaction between the EU and its members states is still delineated by areas of sole or shared competence. In many member states, the outbreak of COVID-19 quickly led to the declaration of a state of calamity or a state of emergency, requiring the implementation of draconian measures restricting fundamental constitutional freedoms in the interest of public health and safety. Several politicians will argue that such actions are within the member states’ most sovereign and natural purview. They might also argue that it is the member states that can better address this health crisis and determine how to more efficiently allocate their own resources, particularly in light of the fact that the EU does not have sufficient and adequate infrastructures to deal with crises of this magnitude. That being said, we should, however, not forget that this is exactly why the EU exists in the first place, to jointly overcome the worst moments of our history and to overcome hardship together, whether it is brought about by war or a pandemic. While this might sound like idealism, I would argue that this is precisely Europe’s core mandate―and I am glad it was realized recently.
EuropeNow Is this something we got wrong over the past ten years? Or did the 2008 crisis not hit all member states in the same way? Was that the reason Greece and Italy were left to fend for themselves?
Diogo Magalhaes People might argue that Greece or Italy were predominantly to blame for their own demise, and though I don’t agree with this, let me give you another example of a tragedy that required common action: leaving Greece and Italy to absorb the mass arrival of refugees only a couple of years later. Recall how the unprecedented refugee crisis caught the EU unprepared to deal with vast numbers of migrants and questioned the very core and cohesion of the EU’s legal framework. Then, like today, many member states introduced internal border controls, which not only disrupted the regular functioning of the Schengen area, but weakened a fundamental right within the EU and questioned its human rights and ethical foundation. We can’t argue that we were caught completely by surprise. In fact, it would be more honest to admit that the EU had grown accustomed to outsourcing its immigration problem to Turkey and Libya, despite the heavy geopolitical costs it incurs in doing so. But there are also signs that the EU was learning from past mistakes, and from failing to act jointly when it matters the most. I think this is recognized by the “Global Strategy for the European Union’s Foreign and Security Policy,” [4] which not only reignited the EU’s Common security and defense policy (CSDP) but even foresaw the need to “work for more effective prevention, detection and responses to global pandemics.”
EuropeNow When talking about socio-economic realities, “solidarity” often comes up. The European Union is always celebrated as an arbiter of peace and prosperity. Why not of solidarity? What makes solidarity so different and so difficult for Europeans to accept?
Diogo Magalhaes We could also argue the opposite.
EuropeNow That is a surprising answer. What leads you to say that?
Diogo Magalhaes The EU Global Strategy initiative I mentioned earlier was precisely born out of the realization that the EU has failed as a global leader and arbiter thus far. When compared to the political, economic, and trade power that it has―as the world’s largest trading bloc, second largest economy, host to many of the world’s political and economic and nuclear powerhouses―the EU’s external action and influence is of incredibly disproportionate size and weight. And I am not sure it is realizing its full potential in terms of prosperity either.
EuropeNow That is a grimmer answer than I expected, but let me try to rephrase my question: when we talk about how the EU was born, we always talk about it guaranteeing peace and promising prosperity, but not much emphasis is placed on solidarity. Why is that?
Diogo Magalhaes I was trying to be provocative in a way. Of course, you are right, and certainly many European citizens who have recently suffered great hardships due to imposed austerity measures would agree with you and would not necessarily equate the EU with solidarity. We mostly measure the EU in terms of what we were taught it was meant to foment: peace, prosperity, and solidarity. But peace, prosperity, and solidarity do not hold equal weight within the European construct and within European integration theory. The EU resulted from a hard-fought for peace that it was entrusted to maintain and to further entrench within the peoples of Europe. Prosperity resulted from the same mechanisms, which ensured the maintenance of peace, the pooling of our resources and the rebuilding of Europe. It was Schuman’s hope that the efforts invested by the peoples of Europe in maintaining peace and in achieving prosperity would create a de facto solidarity. From that perspective, I would argue, solidarity is the EU’s true mandate. The point I was additionally trying to make is that solidarity is in fact much more preponderant than peace and prosperity within the EU’s normative framework, particularly as it is sometimes conflated with loyalty. There have been moments in the EU’s history, when through joint efforts, sacrifices suffered together, and successes shared equally, a sense of a European community has emerged, a sense of solidarity and shared fate. But these moments have been too far between, and it is in that sense that you are right, we have failed the EU’s mandate for solidarity, and we have had to measure the EU’s success with reference to peace and prosperity.
EuropeNow Is there any projection that this might change in future?
Diogo Magalhaes Solidarity has been and will continue to be instrumental within the European construct. Just because we have not been able to fulfill the EU’s mandate with regards to solidarity, it does not mean that we will not. Here again we can hear Schuman whispering that Europe will not be built all at once. The challenge of solidarity however is greatly tethered to the construct of the EU itself, and how we have yet to define the EU’s political legitimacy. I know we keep returning to legitimacy, but so does the EU. Perhaps when we solve one, we can finally promote the other. Until then, it might also be important to remember that lack of political legitimacy creates a cognitive dissonance between the peoples of Europe and the EU that makes all of this more challenging.
EuropeNow Is there a chance that we can still get it right with the rest of the COVID crisis?
Diogo Magalhaes I am more optimistic today than I was some short time ago, since the May 19th announcement of a truly joint recovery fund proposal. This fund presents, for the first time, a viable blueprint for the EU to overcome the hardships of COVID-19, and at the same time, to strengthen EU legitimacy, laying to rest growing doubts about its future. But I also remain somewhat skeptical for two reasons, first because this proposal will still have to be approved by the member states, and secondly and more broadly, because of how these debates have been taking place both nationally and at the European level. It might prove extremely difficult to obtain the necessary consensus that will be required to enact Merkel’s and Macron’s joint recovery plan. But let us hypothesize that we do: will that be enough to enact the kind of paradigm shift that is necessary from all of us to overcome COVID-19 together? If we look at previous crises, particularly the recent financial and refugee crises, we must admit that again and again we missed important opportunities to work closer together, to face hardship together, and to allocate resources jointly. Why? Because during those times we stopped being Europeans, and that is what concerns me most now. Our default cannot be to isolate when we are faced with what are common threats to people (and not just citizens of Europe). We cannot default to just being Portuguese, Italian, German, French, etc. The Schuman declaration, beloved by all but understood by so few, recognized this. As I have recently written: “Love in the time of COVID-19 is recognizing that the task of overcoming this moment rests on all of us together, and no one should be left to face it alone. In one of the most challenging times humanity has ever faced, no one should be abandoned to their own luck, or abandoned within the structures of inequality in our society.” [5]
EuropeNow It is important, but also perhaps easy to speak about love and togetherness, but we both know that there might be great political backlash about the joint recovery fund proposal, against the EU and ECB, but also against Merkel and Macron. Are we disregarding these voices?
Diogo Magalhaes There is no easy answer to that question. I celebrate how the EU is no longer just a project of elites and how, conversely, it increasingly belongs to the peoples of Europe. This growing animosity, or even hatred, towards universalism unfortunately is part of a much larger malaise afflicting all neoliberal democracies, not just the EU. In Europe’s case, it takes on a greater proportion due to the increased influence of populism in the mass politicization of the EU. However, and as I mentioned elsewhere, it is important to remember always that ”the risk of fragmentation that does not come from increased public voice, from hearing citizens’ concerns, but rather from a populist polarization of important political and social issues.” Brexit is a shining example of this.
EuropeNow There is this quote I always return to that says that “if you love democracy―you must love the demos.” To what extent should we really be blaming “populism” and mass politics for our current demise rather than, as Ulrike Guérot suggests in her recent book (Guérot 2019) on the “nation,” the political unwillingness of the elites to secure cohesion and solidarity by constructing a social union?
Diogo Magalhaes I think that within the European context both are to blame and that they cannot always be looked at in isolation. Populism has exacerbated the tensions and the challenges that our political and legal frameworks left unresolved. Why can’t we agree on what the European project is? Why doesn’t solidarity come more naturally to the European Union? Our silence in answering these questions and allows for populism to have a greater voice than it would otherwise. Let us talk for a moment purely about unabashed populism. Still in 2018, even after migration levels dropped by more than ninety percent and were back to pre-crisis levels, and none of the misleading narratives surrounding migration had become a reality, Eurobarometer data showed that EU citizens perceived immigration to be the most important issue facing the EU, replacing concerns over the EU’s economic situation and even terrorism. This was fueled by populist nationalist narratives. You also brought up the financial crisis. Here again populism played a damaging role in the European construct. When the financial crisis hit, two narratives where put forth, as Maduro has noted. The first narrative stated that we should blame the member states who were hit hardest because of their “irresponsible fiscal policies and lack of economic competitiveness” (Maduro 2018). The second narrative was more in line with Guérot’s views as it reveals and blames the systemic deficiencies of the fiscal and monetary structure of the EU. I consider the first narrative blatantly populist, but nonetheless it found widespread support.
EuropeNow Are all of the systemic deficiencies you mentioned still present and causing problems again? I’m thinking about the recently decision by the German constitutional court that criticized the ECJ for not sufficiently explaining and substantiating the necessity and proportionality of the ECB’s purchase of government bonds (the ECB’s Public Sector Purchase Programme brought into life after the 2008 crisis, which surmounts to a form of quantitative easing) that only shows how large the caveats still are.
Diogo Magalhaes Very much so. This decision highlights the challenges of forming a monetary union without a corresponding political union, and the lack of legitimacy that comes with that. We also have yet to accept or even acknowledge the democratic consequences and costs to our monetary interdependence and learn how to deal with them. And finally, we still have not awarded the ECB the independence and the authority that a central bank of its purported importance requires. The member states must find a way to settle these differences quickly. The gaps in the design of the EMU are bound to remain, but the political costs and the adverse effects to solidarity are just too high to be borne in these fragile times.
EuropeNow Speaking of monetary and fiscal policy, what is your take on more large-scale debt mutualization for all potential crises and economic downturns? Are Eurobonds friend or foe?
Diogo Magalhaes Friend. Throughout its history, the EU has been extremely reluctant to issue joint bonds and I understand why. But alongside the arguments that this would change the legal nature of the Eurozone and deprive member states of fiscal sovereignty, I think politically it is still the moral hazard argument that is used as the last bastion against them. I am not unsympathetic to the moral hazard argument, I just think that it’s too easily invoked, and more often than not, misguidedly so. It is my view that the “moral hazard” argument is used to cover up unethical capitalism. It is deeply misleading in the sense that it does not take into account all the input/output processes of complex economies, nor the devastating structures of privilege and inequality in our societies. Within the context of the EU, moral hazard arguments only tell half the story and fail to fully consider the complexity of the integration process and the interdependence of our economies. But should anyone remain unconvinced, Maduro and others have recently suggested a different type of Eurobonds, issued by the Commission itself and guaranteed by revenues from the EU seven-year budget, without the need for debt mutualization.
EuropeNow You mentioned “unethical capitalism.” We are all scared of what the world may look at post-COVID―economically, socio-economically. I think it is perhaps time for less austerity (I am thinking here in particular of funding for hospitals and social security), less strongly leveraged business models, and a reinvention of something along the lines of Keynesian economics. The EEC, EC, and the EU were born in a time of great faith in neoliberalism and in the competitive forces of states competing against each other. I think we have emerged from such a monolithic or rigid way of looking at markets and can no longer ignore all the factors we used to call “externalities,” such as climate, sustainability, social equality and fairness, etc.
Diogo Magalhaes I agree, and where you point to “externalities,” I point again to the moral hazard argument. The idea that an ethically fair and sustainable economy would lead to some member states free riding on the strength of others or not bearing equal risk must be scrutinized and seriously demystified.
Diogo Magalhaes earned his Doctor of the Science of Law degree from Cornell Law School, and his LL.M. in Law in a European and Global Context from Católica Global School of Law. He remains hopeful regarding the European project.
Juliane Mendelsohn is a writer and academic living is Berlin. She wrote her doctorate on systemic risk and the 2008 banking crisis and is academic director of a master’s programme in EU competition and regulatory law.
References:
Guérot, Ulrike. 2019. Was ist eine Nation?. Steidl Bücher
Maduro, Miguel P. 2018. A Roadmap to Exit the Crisis: Democracy and Justice in Europe.
Magalhaes, Diogo. 2019. European Integration Theory and the Future of the European Union After Brexit. Cornell University. Available at SSRN: https://ssrn.com/abstract=3533198
Papadopoulou, Pernice, Weiler (Eds.). Legitimacy Issues of the European Union in the Face of Crisis. NOMOS.
Weiler, Joseph H H. 1991. “The Transformation of Europe.” The Yale Law Journal, Vol 100, No. 8, Symposium: International Law 2403-2483
[3] The Schuman declaration is accessible here: https://europa.eu/european-union/about-eu/symbols/europe-day/schuman-declaration_en
[4] Shared Vision, Common Action: A Stronger Europe. A Global Strategy for the European Union’s Foreign and Security Policy can be found here: https://eeas.europa.eu/sites/eeas/files/eugs_review_web_0.pdf
[5] https://www.onlawandus.org/2020/04/love-in-time-of-covid-19.html#more
Photo: Social distancing disease control | Shutterstock
Published on May, 27, 2020
