Why Europe must act now, and on a big scale

Some are now even saying that the EU was late in its medical reaction on the Covid-19 spread, but it's not too late now to act on the economic consequences.

There is hope that the first wave of Covid-19 will be contained - the sooner, the better.

But it is still very likely that Europe will face a new deadly spread of the virus next autumn or winter. Until a reliable vaccine and cure are in place, we all have to live in this new reality.

Our countries, already suffering heavily from the economic consequences of Covid-19, need immediate support. The issue of the economic response to the pandemic is already an urgent one.

Three major political risks for the European Union must be flagged.

First, the impression in many of our societies that the EU is not doing enough to help and to provide common solutions.

This feeling may fuel the rhetoric of anti-European forces across the continent, who will label the Union as irrelevant.

Second, the appearance of divisions between different member states, even between deferent peoples. If any country in the EU feels abandoned over coronavirus, that would be the final blow to the ideals of mutual prosperity and solidarity the Union is built on.

Third, if policy measures to rebuild the European economy do not go far enough, the credibility of the EU will be gone for good.

In every crisis, two elements are vital for the policy response - speed and scale. This is why it is vital to take decisions fast and to introduce a common European Recovery Plan.

State aid and SURE

Decisions taken by the European Commission are a good start - full flexibility of the budgetary spending of governments, abandonment of the rules around state aid in an economic emergency, the Support to mitigate Unemployment Risks in an Emergency (SURE), and other measures.

The problem now is whether the European Council, irrespectively of the situation, can reach an agreement on the direction for common, large scale, economic policy and all the measures that should follow it.

This debate is blocked, trapped by a divide from the previous economic crisis - the "austerity" versus "mutualisation of debts" issue.

The way out of this deadlock is to reverse the perspective of the argument.

First, we must recognise that after the sharp phase of the virus spread, there will be no automatic return to the economic situation before the pandemic.

Most of the world's economy is blocked and the symmetrical shock is already deeply affecting all of us.

Second, even the strongest and most productive economies will not recover by themselves if their major partners have collapsed. It is clear - all EU countries are in the same boat. This leads us to an inescapable conclusion: our approach must be 'whatever measures are needed to recover the European economy will be taken', to adapt the famous phrase of Mario Draghi.

If we follow this line of thinking and action, we must not exclude by default any economic tool.

Maximum mobilisation of European funds?

Very well, it can be a fast and flexible way to support governments to keep people's jobs and salaries.

Capitalisation of the EIB and a coordinated plan with the national promotion banks? Perfect - this approach may provide hundreds of thousands of SMEs with liquidity and cash to stay alive and save jobs.

Access to ESM and ECCL tools for all countries without 'conditionalities' from the past? This would be welcome, if it provides enough good conditions for borrowing cash for emergency economic and social spending.

Even with these measures, inevitably we will face the reality that the economic crisis is becoming asymmetrical. We are all suffering the consequences of the Covid-19 spread.

In some countries the economy is still running, but others are practically in full lockdown.

This reality is not due to domestic economic policies, it is based on the phase and depth of the medical emergency. If one, two or several countries face the risk of an economic collapse and fall victim to a fear-based reaction from the markets, how will the other countries survive the domino effect? Even running economies with low public debt will face economic volatility and the eventual exhaustion of their reserves.

We urgently need to develop a short, medium- and long-term recovery plan, which includes all possible mechanisms to provide security and recovery to all our economies and societies.

That should inevitably include Eurobonds, directed towards the new unprecedented situation to provide a common response of a scale that will guarantee the economic recovery of Europe.

As member states we will survive this crisis together, or we will sink one by one.

No one will be spared.

Today we are living through a moment of history, that requires courage and wisdom to take the right decisions. It is the duty of the political leaders and institutions to guarantee the future of Europe and the wellbeing of its people.