The EU's big plan to save itself

The EU's big plan to save itself

Facing the biggest economic crisis in the EU's history, the European Commission's president, Ursula von der Leyen, pulled out all the stops this week, unveiling an unprecedented plan to boost the union's post-coronavirus recovery.

The plan: The EU would go to international capital markets to raise 750 billion euros ($830 billion). 500 billion of that would be given to member states as grants to fund economic recovery over the next seven years; the remainder would be issued as loans to be paid back to Brussels. The EU would pay back its bondholders for the full 750 billion plus interest by 2058, in part by raising new EU-wide taxes on tech companies and emissions.


Never before has the EU raised debt of this magnitude. But without it, von der Leyen warned, the EU would risk splintering into "haves and have-nots" – that is, countries that have the money to rescue themselves and those that don't.

Having-not, of course, provides fertile ground for Eurosceptic populists, particularly in the South and East, who already think the Union is a sham.

But here's the catch. The plan requires unanimous approval from the parliaments of all 27 EU member states, and that's where things get interesting. Everyone agrees that this is a crisis without precedent, but there are several blocs of countries with divergent interests on how to respond to it.

The "Solidarity" South. Countries like Spain and Italy, which bore the brunt of the pandemic's public health and economic impacts, love the plan. They are already highly indebted, which means they have less room to spend or raise cash of their own to reboot their economies. In their view, if the EU is really a "union," then it should show solidarity in a time of crisis. And solidarity right now is spelled C-A-S-H.

The "Frugal" North. Not so fast, says a group of northern European countries known as the "frugal four" — Netherlands, Sweden, Austria, and Denmark. Their governments, which have relatively low debt levels and sound finances, oppose giving away so much of the money as grants – particularly to countries they worry are fiscally irresponsible — and they are wary of new EU-wide taxation powers.

And then there's the East. Swift lockdowns contained the virus effectively in most former eastern bloc countries like Hungary, Poland, the Czech Republic, Croatia, and the Baltics. But the economic hit has been severe as exports and tourism dry up. These countries, which also lack deep pockets, want to make sure they don't get overlooked in favor of the more visibly COVID-impacted southerners.

And there's an added twist for countries like Hungary and Poland, which have clashed with Brussels over recent attempts to strangle civil society: they don't want bailout money to come with EU demands on new respect for EU rules on democracy and rule of law.

The Big Two: German Chancellor Angela Merkel has traditionally been wary of big bailouts, but last week shifted position and joined France in calling for a 500 billion Euro grant fund. That puts the support of the EU's two largest economies behind Ms. von der Leyen's proposal, just as the horse-trading begins.

Demography is destiny. That ominous-sounding pronouncement, credited to French philosopher Auguste Comte, is today taken to mean that a nation's fate depends on the youthfulness of its population. For a poor country to become rich, it needs lots of young people ready to work, to support those too old or too young to work, and to pay taxes. This is called the "demographic dividend."

That's an important part of China's success story. Over the past 40 years, more than one billion people have emerged from poverty in China. Waves of young people surged from the countryside into cities to work in factories. The state invested in education, and wages helped young workers, and then their children, go to school. The state also began a drive to develop the technologies of the future, by any means necessary. In China, once dirt-poor, hundreds of millions have created a middle class.

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Not everyone thinks that President Biden's decision to pull all US troops out of Afghanistan by 9/11/21 is a good idea. Conservative Congressman Mike Waltz (R-FL), a combat-decorated Green Beret with multiple tours in Afghanistan, thinks that the US still needs to maintain a small presence in the country to avoid incurring "massive risks." In a spirited discussion with Ian Bremmer on GZERO World, Waltz, who served as counterterrorism advisor in the George W. Bush administration, argues, "The next 9/11, the next Pulse Night Club, which is right on the edge of my congressional district, the next San Bernardino, that's now on Biden's watch. He owns it with this decision." Their conversation is featured in the upcoming episode of GZERO World, which airs on US public television starting Friday, April 23. Check local listings.

Vaccines are the best hope to end the COVID-19 pandemic. But rich countries are hogging most of the doses, with more than 83 percent of shots administered to date having gone to residents in high- and upper-middle-income countries. Most poor countries will have to wait years to achieve widespread vaccination, according to one study.

To address this inequity some stakeholders are pushing hard for waivers to intellectual-property (IP) rights through World Trade Organization trade rules so that manufacturers in poorer countries can make their own vaccines locally. India and South Africa have been leading the charge, which would essentially mean that deep-pocketed pharma companies like New York-based Pfizer, for instance, would have to hand over the keys to the kingdom, allowing local companies in New Delhi and Johannesberg to make generic versions of their vaccines.

Unsurprisingly, the debate has gotten fiery, with passionate arguments emerging both for and against.

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Carl Bildt, former Prime Minister and Foreign Minister of Sweden, shares his perspective on Europe In 60 Seconds:

What are the Russians up to against Ukraine?

We simply don't know, except the fact that they're concentrating a huge amount of military forces. And you don't do that for nothing or for fun. They are there for a purpose, to have pressure or to undertake limited to larger operations. We simply don't know. And when Putin delivered his State of the Union speech the other day, he didn't say a thing about this. They are now talking about withdrawing the forces. But let's wait and see. They have talked about withdrawing forces from Syria for a long time, but we haven't seen that as of yet.

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Australia rips up Belt & Road deal: Australia cancelled two 2018 deals signed between Victoria, Australia's wealthiest state, and the Chinese government, that committed the two sides to working together on initiatives under China's Belt and Road infrastructure development program. Foreign Minister Marise Payne said that the agreements "were adverse to our foreign relations." Similar deals between Victoria and institutions in Iran and Syria were also abandoned by the Australian government this week, under a 2020 law that allows Canberra to nullify international agreements struck at local and state level. (Australian universities say the "foreign veto bill" amounts to "significant overreach.") Meanwhile, Beijing hit back, calling the move "unreasonable and provocative," and accusing Canberra of further stoking divisions after a series of escalatory moves by both sides that have seen China-Australia relations deteriorate to their worst point in decades. Chinese investment in Australia dropped by 62 percent last year, a massive blow for Australia's export-reliant economy.

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50: The US will aim to cut its greenhouse gas emissions by 50 percent from 2005 levels by the end of the decade. The Biden administration's commitment, double the goal set by Barack Obama almost six years ago, was announced to coincide with a virtual Earth Day climate summit attended by dozens of world leaders.

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Russian president Vladimir Putin on Wednesday threatened an "asymmetrical, rapid, and harsh" response for anyone that dares to cross a "red line" with Russia.

What's the red line? Putin says he'll decide on a case-by-case basis. And the cases at the moment are growing: the US has sanctioned Russia over cyber crimes; Putin critic Alexei Navalny is near death in a Russian prison; the Czechs say Russia blew up a Czech munitions depot; and as many as 120,000 Russian troops are reported to be massing along Russia's border with Eastern Ukraine.

Which is to say: there's potentially a Sol Lewitt's-worth of red lines to ponder now.

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