In this ASEAN exclusive, Francesco Alberti speaks to Vincenzo Amendola, Italian Minister for European Affairs to better understand the European Union’s response to the deadly coronavirus pandemic that is sweeping Europe and the rest of the world.
The European Union (EU) is facing a pivotal moment in its history. “The coronavirus pandemic will change the way the world interacts and will definitively test the resilience of the 27-nation bloc,” said Vincenzo Amendola, Italian Minister for European Affairs in a recent interview.
“The EU definitively is not facing a battle for survival, rather it is fighting to avoid an internal fragmentation that may result in a Europe that moves forward at different speeds,” the minister added.
“The EU is the world’s biggest free-trade bloc and the crisis has touched the real economy, not just the financial markets. So, the bet is on the strength of the European Union,” Amendola said.
What Lessons Will Europe Draw From The Crisis?
“I remember the EU’s slow reaction to the crisis that followed the Lehman shock in 2008,” Amendola said. “It was slow.”
In October 2010, after the Deauville, France, declaration by then-French President Nicholas Sarkozy and German Chancellor Angela Merkel, which unleashed an attack on sovereign debt, Europe was too slow in reacting. “It took almost two years, until July 2012, before Mario Draghi [then-chairman of the European Central Bank (ECB)] came out with his now famous ‘Whatever it takes’ speech” that calmed the markets, the minister added.
“Now it is different. Europe has understood that speed and unity are essential in overcoming the crisis and for the EU to maintain its strength. The European Commission (EC) acted very swiftly suspending the growth Stability Pact allowing member states more flexibility in their budgets and the ECB enacted the PEPP,” Amendola said.
The Pandemic Emergency Purchase Program (PEPP) is a €750 billion (US$813.5 billion) asset-purchase program by the ECB to counter the risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the outbreak of COVID-19.
“What was missing until now was a common fiscal policy. Now after the European Council meeting of 23 April, we have taken the first step in this direction,” he said. “We need to be able to say ‘Whatever it takes’ also at a national level.”
What Is Europe Doing?
On top of the above-mentioned measures, the Union is working on other steps to provide financing and liquidity to member states. “Friday’s [8 May] Eurogroup meeting will discuss the operational development of the European Stability Mechanism (ESM) with the aim to make the instrument operational by 1 June, as indicated by the European Council following on 23 April,” as well as other measures such as the Support to mitigate Unemployment Risks in an Emergency (SURE) programme to provide financial assistance to member states to address sudden increases in public expenditure for the preservation of employment and the European Investment Bank (EIB) package to alleviate liquidity and working capital constraints for SMEs and mid-caps.
Can You Tell Us About The Recovery Fund?
“Likely by mid-May, the European Commission will draft a proposal that will then be sent to the national governments and will be discussed by end of June.” The Recovery Fund will have its legal basis in the EU 2021-2027 budget, however, as the budget will take effect on 1 January, 2021, so “we are discussing a front load, or a way to use the funds as soon as possible,” Amendola added.
Once the accord is hammered out, “the Recovery Fund will be activated immediately.”
“The Fund will not rely only on the budget, but also on debt instruments issued in the capital markets, and this is very important because it is a path that has never been trodden before but already foreseen in the EU Treaty,” the minister said.
Toward the end of April, Paolo Gentiloni, the European Commission Economy and Financial Affairs Commissioner, said in an interview with Italy’s RAI television that the fund aims to have about €1.5 trillion (US$1.6 trillion) and should be available by mid-September.
What Is The EU Exit Strategy From The Containment Measures?
“The EU is working to implement a common exit strategy which will be of paramount importance to guarantee not only free trade, but also free movement of people.” Italy, Japan and several other countries are introducing, or have already introduced apps to trace people’s movements to warn users in case they have been in contact with someone diagnosed with COVID-19.
“One of the objectives is to coordinate and link the various national apps so that we can guarantee free movement of people and most of all guarantee their safety,” Amendola added.
“The next step will be to coordinate at the international level.”
How Is The Development Of A Vaccine Coordinated?
Italy is working on the development of a vaccine against the coronavirus. This is part of a “coordinated effort led by the European Commission which is part of the Global Response” program that has raised more than €7 billion (US$7.5 billion) in funds to ensure the joint development and global deployment of diagnostics, treatments and vaccines against the coronavirus. “Many countries have given their contribution” in terms of funding and research and “we are looking forward to strengthen the relationship not only in the development of a vaccine, but also in the fields of virology and pharmaceutical cooperation,” Amendola explained.
What Does The Pandemic Mean For Global Power Realignment?
In the light and magnitude of the recent events, “we have to be ready to spot new trends in the global relationships between world powers. It is very clear that geopolitical value chains will need to be revisited. Some people talk about a de-globalisation in the mid-term” and a realignment of commercial and financial relationships. “Others feel multilateralism is the way of the future,” he said.
“Europe needs to affirm, together with its western allies and in cooperation with its international partners, its sovereignty and independence. We also need to look at regions and countries that may be heavily affected by current events, such as Africa,” he added.
“Europe’s sovereignty and independence must also come in the form of economic independence by stimulating internal consumption, and promoting a fairer international trade”
In this context, “this black swan puts the global power balance into discussion. Italy will chair the G-20 in 2021,” Amendola said.
This will provide Italy, as a member state of the EU, “an opportunity to lead the effort to rebuild the response capability to events such as a pandemic,” or other global crises within a multilateral forum.