Despite all the recent references to a new Marshall Plan to help Europe, it would be more appropriate to talk about an EU-owned New Deal, based on Roosevelt’s “3 R’s” – Relief, Recovery, and Reform, writes Ambassador Maurizio Massari.
Maurizio Massari is the Italian permanent representative to the European Union.
The need for a Marshall Plan to help Europe recover from the COVID crisis has been a recurrent theme in recent weeks.
But no matter how noble may sound the reference to the aid plan put together by the US Secretary of State George Marshall after World War II, Europe cannot count on US money to solve its economic woes this time.
If we really want to borrow the term for what Europe needs right now from the US political dictionary, it would be more appropriate to talk about an ‘EU-owned’ New Deal.
Adopting a set of expansionary economic measures known as the New Deal, based on the “3 Rs” (Relief, Recovery, and Reform), the then US President FD Roosevelt managed to pull his country back together after the 1929 Great Depression.
The reasons for a European New Deal today are no less compelling and are both domestic and international in nature.
Butter or guns?
As a matter of fact, like in all major crises, COVID-19 is going to have its losers and its winners both within societies and at the international level.
The winners will be those who have displayed the highest degree of internal economic resilience. Resilience is the ability to adjust to, and recover from, the negative impacts of external economic shocks, including natural disasters.
As we are seeing right now, international powers, such as the US, China and Russia, are benefiting from their ability to mobilize limitless internal resources in order to cushion COVID’s negative economic and social impact, to consolidate their internal resilience and to strengthen their global role on the economic, technological and military levels: they certainly are not going to be forced to choose between butter and guns.
The battle for resilience in the post-COVID world looks set to be more difficult for Europe and the EU.
There is significant economic and social divergence among the 27 member states that pre-existed the current crisis and that could widen yet further in its aftermath; and on the global level, despite the EU having openly stated its geopolitical aspirations, it is still an incomplete power, to put it mildly.
Its capacity to spend on defence has so far proved to be limited and is likely to be further affected as a result of COVID-19. With decreasing resources, European governments will necessarily have to give priority to butter rather than guns.
This means that the EU’s economic resilience as a whole will have to be robustly underpinned if we want the EU to remain relevant also on the global stage and to play the geopolitical role to which it legitimately aspires.
‘Completing’ the job
This is another reason why we need an ambitious European New Deal. And the EU has come up with several important economic responses to the COVID crisis to date.
It has relaxed or suspended fiscal and state aid rules to allow the member states to use national resources.
It has devised a set of instruments (€500 billion overall) ranging from SURE, in support of national employment schemes, to the European Investment Bank’s new lending facility for companies and the unconditional and facultative use of the European Stability Mechanism (ESM) for health expenditure with a ceiling of 2% of a member state’s GDP.
Negotiations are still ongoing regarding further instruments to ‘complete’ the job and help deliver the overall European macroeconomic response necessary, estimated at between €1-1,5 trillion.
This would send out a powerful and positive signal to businesses and consumers and help to remedy to a continent-wide economic contraction which according to all forecasts suggests is likely to cause a worse shock than the 2008-9 crisis.
I cannot discuss the substance of the current talks, for obvious reasons, but I believe it is important that the set of measures, including the new Recovery Fund, eventually decided on in the coming weeks will – in terms of their immediate availability and magnitude – make it possible to create a ‘level playing field’ for recovery across Europe and to buttress the EU’s and the eurozone’s resilience.
Mindful of Roosevelt’s “3 R’s”, the measures already endorsed by the Eurogroup and the new Recovery Fund should focus on relief and recovery, while the future Multiannual Financial Framework (MFF), for its part, would further consolidate recovery and implement the EU Strategic Agenda, which constitutes the reform.
In a nutshell, we need a New Deal to help spread recovery evenly across the whole of the EU: we need a New Deal that leaves no one behind.
Rapid recovery and convergence will amplify the benefits of the internal market to everyone’s advantage, whereas greater divergence will be detrimental to all.
An economically more resilient Europe would also be better equipped to face global competition, which could well become even fiercer after the COVID crisis.