After four days of fractious negotiations, the 27 European Union member states are close to reaching a coronavirus recovery fund. But these negotiations have only underlined the great tension between the EU idea and national interests.
According to the BBC, the fund is now expected to involve about $450 billion in grants and a similar number in loans. But while those numbers might seem like a victory for those wanting a large bailout, they actually show another truth.
Arriving in Brussels late last week, the leaders of Greece, Italy, and Spain had sought a much larger share of grants as a percentage of the final agreement. Their demand reflected their relative domestic fiscal insecurity. In contrast, the “frugals” of Austria, Denmark, Finland, the Netherlands, and Sweden demanded that loans rather than grants be the centerpiece of any agreement. Frustrated by the continuing failure of Italy and Spain to reform their high-regulation, low-mobility economies, the “frugals” oppose big grants absent associated reform.
Yet this isn’t ultimately a battle over fiscal policy. It’s a symptom of the far broader tension at the heart of the so-called European “project.” Led by French President Emmanuel Macron, the project seeks the EU’s gradual transformation into a formal unitary federal state, a la the United States.
The challenge in the face of this federal ambition, however, is that while it finds favor from many member states, it sparks concern from those who believe their national interests would suffer under such an arrangement. This fear was a core driver of the pro-Brexit movement that saw Britain depart the EU. In the same vein, the robust stance of Netherlands Prime Minister Mark Rutte against a grant-heavy bailout reflects Dutch domestic opinion.
The Netherlands’ politics lean conservative, but opposition to Rutte’s coalition government comes from both right-wing populist and left-wing parties. With the next election scheduled for March 2021, Rutte thus fears coming out of this summit without fiscal safeguards he can sell at home.
Rutte’s challenge encapsulates those facing the other “frugal” leaders. The “frugals” recognize that their populations are increasingly frustrated with paying taxes in order to support countries they (somewhat justifiably) regard as being less productive. This concern finds added momentum in that it follows an earlier grant-heavy coronavirus bailout. And it must be said that Macron didn’t exactly help his credibility, here, when France, with its comparatively large and strong European economy, received a large share of bailout funds.
It’s likely that some kind of deal will be reached on Monday or Tuesday. Still, the fact that it’s been so hard finding agreement shows that the tensions between nation and project aren’t going away. Indeed, they seem set to escalate.
