Coronavirus exit: Re-inventing the EU supply chain

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

File photo. A truck full of brand new Dacia cars exits Automobile Dacia car factory in Mioveni city, 130 km north-west of Bucharest, Romania, 07 November 2017. [Robert Ghement/EPA/EFE]

This crisis is also teaching us logistical lessons, and particularly the need to produce things at home or closer to home. Eastern Europe remains competent and cheaper, and can make the difference in the EU supply chain, writes Radu Magdin.

Radu Magdin is a global analyst and consultant, and has previously been a prime ministerial adviser in Romania and Moldova. He writes on EU affairs and global leadership, as well as strategic communications. 

The Eurogroup agreed, finally, last week, on a €500 billion package to support member states, companies and workers in the coronavirus crisis. The details of the recovery plans are yet to follow.

It is not yet clear nonetheless what will happen to the non-eurozone countries; in fact, only 2/3 (19 out of 27 EU member states) sigh happy, irrespective if the “coronabonds” get a green light or not in the weeks to come.

The EU did the right thing for the eurozone members on 9 April, but Brussels should beware of the continuous need to be on call and swiftly respond to capital’s needs in the months to come. This will be a prolonged recession, and avoiding a great depression is also about how we can find better solutions, including on the pan-EU and citizen communications front.

At the same time, as a EURACTIV leak showed recently, capitals call for ‘ambitious’ use of bank regulation to help with coronavirus. This approach deals with interpreting the flexibility of banking rules in the coronavirus period, to ensure that money flows to the real economy, and is another lesson from previous austerity times.

The current crisis may be a “jamais vu”, not a ” déjà vu”, but that does not mean that we have to make similar mistakes like in the previous crisis, which left Europe’s social fiber still reeling. The rifts of the past repeated in the past weeks, particularly in between North and South, and the agreement this week shows that Europe understood part of its previous lessons.

The text of the accord allows the European Investment Bank to set up a fund to back as much as €200 billion of loans to cash-strapped companies across the bloc. But only eurozone countries will be able to draw on a credit line worth 2% of its annual GDP from this, and for health purposes.

More important for the cohesion of the EU job market is the European Commission’s €100 billion jobless reinsurance plan.

Protecting workers across the club has never been more important, but this “protection” should mean that Eastern non-eurozone countries now protect their workers by reexporting them to Western countries, the latter realizing amid the corona logistical stalemate that Easterners are in fact great seasonal – or permanent – workers.

Otherwise, the North-South previous crisis rift will leave way for a renewed West-East one, on a euro-non euro dividing line. This frustration will not be helping the ambitious plans of a Geopolitical Commission, in terms of internal cohesion, strategic autonomy, Green Deal, or global Europe projections.

So, Brussels must tread carefully in the weeks and months to come, and act as both peacemaker and dealbreaker.

Some Eastern countries, still pro-European and not yet eurosceptic, may grow disappointed if beyond the initial announcements by the EC in terms of budgetary flexibility and other financial aid (great, by the way!), are not just a starter for further mechanisms that enhance cohesion in the current global recession.

Coordination in “exit strategies” will be hard to do, via Brussels, since countries hit by the health emergency are at different stages of combined drama and economic pressures. Italy and Spain, for example, are early inners hoping economically and humanly also early outers.

But with the prospect of 2-2,5% of national GDP vanishing each new month of inactivity, pressure will be mounting on national leaders to both claim victory on the virus – at least a temporary one – and get people to (still existing?) work.

Western Banks should also be careful in how they show lessons learned from the previous crisis, and show dedication to countries and people in the East as well.

Otherwise, please don’t complain about emerging populism in these profitable markets in the past, and please also be wary that competition – including geopolitical one – will become stronger amid a scarcity of resources and investments.

Don’t mind East Asian banks or competition from the Gulf countries if you are not committed to your neighbourhood, a comment valid for both CEE and Western Balkans and Eastern Partnership countries.

Populism and great power competition may grow not just at home, nationally, but on all markets where top EU banks are present. Investment screening mechanisms help, but other gaps in the markets will be filled: some local banks will grow, but other ones will enter the national markets despite geopolitical considerations, if EU-based players do not walk the solidarity and involvement talk.

But not all is gloomy and this article is not about warnings only, but also about opportunity. This crisis also taught us logistical lessons, and particularly the need to produce things at home or closer to home.

To prevent a wave of strongmen temptations and renewed nationalism, EU mechanisms should be put in place to implement economic opportunity. Eastern Europe remains competent and cheaper, and can consolidate as part of West’s or North’s supply chain.

“Made in EU” products and services are better actually wholly made in the EU. There is no more reliable logistical chain than the one close to you, which TEN-Ts are supposed to further strengthen. Isn’t it better to wait for your spare parts via Bucharest-Bratislava-Berlin than get blood pressure nowadays due to global mishaps?

So, in the rethinking of global supply chains, it’s a wise investment to think regional and CEE, or the EU South, for the richer Western and Northern partners in the European family. This would help EU cohesion, solidarity and it’s also an investment in our mutual prosperity.

Europe started the covid19 crisis amid criticism, from the inside and from some leaders from our neighbourhood. It could continue on the right path, by hitting the ground running and redefining what’s normal in the After Corona New Normal: investments are the best cure for both hostile geopolitical takeovers and national ills.

Also, pan-European East-West, North-South, in fact in all directions investment connection, including via M&As to create European champions that both respect competition laws at home (for consumer sake) and compete abroad (for Global Europe’s one) is a great solution.

A German-Swedish-Romanian or a Spanish-Polish-Greek global champion would also work better cross-culturally, and avoid episodes like the ones experienced by Renault Nissan. Dacia Renault proves it: more EU is best for all inside!

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