Has Covid Rescued Europe?

This week we look at the big changes in European politics during the crisis and ask who has managed to turn it around. Is Italy now a model for crisis management? Has there been a reorientation in German politics under Merkel? Can the EU rescue fund really rescue the European project? Plus we discuss the long-term implications of big state politics for the future of Europe. With Helen Thompson, Lucia Rubinelli and Hans Kundnani.

Talking Points:

Over the summer, life—including political life—in Italy resumed some normalcy.

There will be regional and local elections, as well as a constitutional referendum, at the end of September.The government now seems to be on firmer ground. This has to do with the recovery fund, and the fact that the two main parties in the coalition have decided to run together.The Five Star movement had previously said it would never run with another party. It is becoming a more establishment party.

Salvini’s comeback has slowed down. 

Salvini has made several mistakes over COVID.The League runs the region that suffered the most during the COVID crisis. The president of that region, who is close to Salvini, is now embroiled in a corruption scandal that has to do with the process of buying PPE.

Italy has stabilized the situation domestically by excluding those who are most radical about the euro and by getting ECB and wider EU external support for Italy’s debt.

In Germany, there is a sense that Merkel has moved quite radically on debt mutualization in the Eurozone. But there’s some misunderstanding about what the recovery fund does: it doesn’t deal with the pre-2020 macro imbalances in the Eurozone. 

During the negotiations in March, Conte was hard on the EU. But once it was negotiated, the tone switched completely. 

The debate over the conditions of accepting money from the EU is almost completely focused on whether Italy should apply to the European Stability Mechanism. This doesn’t seem to translate to the recovery fund, which is surprising.Five Star can criticize Europe in one regard, while accepting everything else.But unhappiness with conditionality always reasserts itself in Italian politics because of Italy’s debt position and Eurozone fiscal rules.

There is too much focus on Merkel. 

Merkel has embodied a broad consensus in German politics that has existed for the last 15 years. She tends to go with the flow of German public opinion.The shift in Germany that led to the recovery fund is an example of this: she shifted because she saw public opinion shifting.The big questions are: who will be Merkel’s successor? And who will be the junior partner in the coalition that successor leads?

In both Italy and Germany, there appears to be a doubling down on grand coalition politics.

In Italy’s case, this has involved co-opting a previous anti-establishment party. In fact, Five Star is now the senior partner.In Germany, it’s more about keeping out anti-establishment parties.

There is a danger that the EU constrains countries from making the kind of shift toward state intervention that European governments currently want to make due to COVID.

This could become a problem down the line.If EU countries were unanimous about this shift, you could imagine a remaking of the EU, but the old divides will almost certainly come back.

Mentioned in this Episode: 

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