Economic Response To Coronavirus Again Exposes North-South Divide In EU | WAMC

Economic Response To Coronavirus Again Exposes North-South Divide In EU

Apr 6, 2020
Originally published on April 6, 2020 8:33 pm
Copyright 2020 NPR. To see more, visit https://www.npr.org.

MARY LOUISE KELLY, HOST:

In Europe tomorrow, finance ministers are meeting - virtually, of course - to try to bridge a divide. The divide is over how to pay for assistance desperately needed by countries hit hardest by the coronavirus. Tomorrow's talks are not likely to be a friendly discussion. Old divisions between the north and south of Europe are resurfacing.

NPR's Sylvia Poggioli is in Rome. And NPR's Rob Schmitz is in Berlin. They're both here to talk about this.

Hey, you two.

SYLVIA POGGIOLI, BYLINE: Hi there.

ROB SCHMITZ, BYLINE: Hello.

KELLY: Sylvia, I'm going to let you start. What has been the economic toll of the virus in Italy?

POGGIOLI: Well, Italy has the most stringent lockdown outside of China. Very few businesses and factories are working. We don't know how long it's going to last. And with a huge debt already, the Italian government approved a $28 billion emergency package, but much more is going to be needed to cover unemployment benefits for those who lose jobs, financial assistance for firms that stop production and investments to relaunch the post-corona economy. And Spain is very close behind. In an op-ed for several European papers this weekend, Spain's Prime Minister Pedro Sanchez said Europe must build a wartime economy and promote European resistance, reconstruction and recovery.

KELLY: Rob, what about in Germany, the biggest economy in the EU?

SCHMITZ: Well, I think most of the EU thinks that the aid that Sylvia is talking about is a good idea. But the northern countries of the EU, especially Germany, the Netherlands, Austria and Finland - otherwise known as the frugal four when it comes to these types of fiscal debates - do not think this aid is a good idea. The Dutch have been particularly vociferous about this. Prime Minister Mark Rutte has said he could not foresee any circumstance when his country would support this type of assistance for other EU members.

KELLY: Sylvia, I'm going to guess that that resistance is not going down well in Spain and Italy.

POGGIOLI: Not at all - that attitude reopened the wounds of the euro crisis of a decade ago. When the outbreak started here, EU countries shut their borders with Italy. Dutch politicians blamed the outbreak on southern mismanagement, and Germany refused to sell medical supplies to Italy. It reversed itself only after Russia and China, with much fanfare, rushed medical aid to Italy. But so - these old resentments resurfaced. Well, this time, they can't do that blame game because all EU citizens are in the same pandemic boat together.

KELLY: Rob, I mean, just give us a little bit more insight into how the frugal four - (laughter) as I've just learned they are known - into how they see it. I mean, they also have bad memories of the eurozone crisis a decade ago.

SCHMITZ: They do. And, you know, at that time, Germany was angry with Greece, Italy and Spain for not keeping their financial houses in order. And those old feelings are resurfacing. I spoke to Judy Dempsey, a senior fellow at Carnegie Europe, about this, and here's what she said.

(SOUNDBITE OF ARCHIVED RECORDING)

JUDY DEMPSEY: The Germans are highly reluctant to do this because they think this would just open the floodgates to long-term lax fiscal discipline. The virus has exposed yet again old, fundamental, traditional cracks in the EU over how to deal with it financially.

KELLY: Sylvia, speak to that. I'm curious your reaction. Are these fundamental cracks? Is European solidarity, the whole EU project, really under such strain?

POGGIOLI: They certainly feel that way here in the south. They see the German and Dutch proposals as punitive, too many austerity strings attached. Pro-European sentiment is already declining in the south, and the politicians here warn that halfway measures would only play into the hands of right-wing populists. Now, the Italians, like the Spanish, say the pandemic is a war requiring wartime tactics, a kind of Marshall Plan for Europe, not the old bureaucratic rules and regulations. They say northerners should see solidarity - even costly acts of solidarity - as acts of enlightened self-interest. If the economies of Italy and Spain collapse, they ask here, what will happen to export-based economies in the north? Or as the former EU commission president Romano Prodi put it recently, if the southern economies implode, who's going to buy Dutch tulips?

KELLY: So all of this would seem to bode really well for tomorrow's meeting when the EU finance ministers get together. Rob, what are we watching for?

SCHMITZ: Well, it's certainly going to be dramatic. You know, German Chancellor Angela Merkel still prefers to use what's called the European Stability Mechanism to help Italy and Spain. And this was a loan program set up during the eurozone crisis that, in return for a loan, forced states to implement strict austerity measures. But southern states would feel like they're being unnecessarily punished through a program like this. And secondly, there's only around $450 billion in this fund, and that's not likely enough to address the economic damage this virus has caused.

KELLY: No, particularly when you compare it to the $2 trillion rescue package and more coming here in the U.S.

SCHMITZ: Right. Right. It's - it doesn't even get - it might fund one of the countries, but we're looking at many countries that need help here. And Merkel has actually come under a lot of criticism in her own country for her stance. Seven prominent German economists have called on her to change her mind. And the popular newspaper Der Spiegel ran an op-ed over the weekend calling Germany selfish, small-minded and cowardly.

KELLY: Wow. Before I let you both go, I wonder if I could get a quick snapshot from each of you just on how it's going where you are. Sylvia, you first; how is life today in Rome?

POGGIOLI: Well, let me give you a comparison. This is Easter week. And normally, you would have tens of thousands of pilgrims and tourists, you know, all over the city. It is so quiet. I feel like I'm out in the countryside.

SCHMITZ: Yeah, this is Easter weekend. Most Germans would probably be in Italy or Spain right now. And so instead, they're here in Berlin at home. And people are outside. They're keeping their distance from each other. There's a lot of police patrolling the parks, but it seems to be functioning OK.

KELLY: That is NPR's Rob Schmitz in Berlin and Sylvia Poggioli in Rome.

Thanks to you both.

POGGIOLI: Thank you.

SCHMITZ: Thank you. Transcript provided by NPR, Copyright NPR.