The EU has urged global action to confront the coronavirus pandemic and help poor countries least equipped to deal with it. Now the strength of those rhetorical commitments is being put to the test.
Potential World Health Organization (WHO) funding shortfalls and looming health and hunger crises in fragile states in Latin America, Africa and the Middle East demand action from European states already hard-hit by domestic crises. So far, some have been more willing than others to finance the multilateral organisations they say they support (see chart below).
Brussels and big EU countries say the feared coronavirus emergency outside the rich world is a widely-shared responsibility. The heads of the European Commission, European Council, Germany, France, Spain, Italy, the Netherlands and Portugal joined ten African counterparts in a public declaration last week that if the pandemic is not beaten in Africa, “it will return to haunt us all”. The leaders said they expected both the WHO and the UN’s World Food Programme to play critical parts.
Europe’s role is even more prominent because Donald Trump last week suspended funding to the WHO, depriving it of the biggest contributor to its $5.45bn 2018-19 biennial budget. The US president claims it has mishandled the pandemic — an allegation the UN body denies.
The WHO funding dispute has also exposed some surprising contrasts in what EU countries have committed to the global health body.
While Germany’s 5.36 per cent share in 2018-19 compared favourably per capita to Washington’s 16.4 per cent, France was at just 1.4 per cent, Italy at 1.09 per cent — and Spain’s 0.48 per cent was not even half the Democratic Republic of Congo’s contribution. Romania and Croatia offered less than Libya, which has been ravaged by civil war for the best part of a decade.
There are qualifications to this picture: the European Commission gave 2.41 per cent, while countries’ individual development policies might mean they focused more on other multilateral institutions. But there does appear to be room for EU states to do more.
Another potentially revealing snapshot comes from a World Food Programme warning on Tuesday. The WFP said it had reached only a quarter of the $350m it targeted in an appeal launched weeks ago to boost air connections to ferry emergency supplies. Of the five countries the WFP said were first to pledge — Canada, the UK, Norway, Denmark and Liechtenstein — only one is in the EU.
EU officials and member states say they are showing their international commitments through various other initiatives. One is a European Commission-hosted pledging conference on May 4 to promote the development of Covid-19 treatments and vaccine candidates.
If Europe truly believes it is a matter of both morality and self-interest to help the world’s most vulnerable people tackle the pandemic, there will surely be more efforts and money to come.
[email protected]; @mikepeeljourno
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Chart du jour: flashing red
The eurozone’s most important economic stress indicator is beginning to flash red again. Italy’s benchmark borrowing costs have crept up to pre-ECB stimulus levels — suggesting that investors are concerned about the state of the country’s solvency and its political dynamics. Klaas Knot, Dutch ECB member, has warned the central bank has “limits” on how far it can act to reduce bond spreads that are caused by “political” factors. (Reuters) Martin Wolf disagrees.
Summit battle lines
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Europe’s northern member states are ready to quash a push from Spain and France for the EU to raise debt and hand it out as grants to crisis-hit member states ahead of Thursday’s summit, write Sam Fleming, Mehreen Khan and Jim Brunsden.
As leaders get ready to dial in for their latest e-summit, European Council president Charles Michel faces the tricky task of bridging deep divides across a range of issues on how to fund Europe’s economic recovery.
The biggest sticking point is an EU recovery fund, tipped to be at least €1tn, that is meant to fuel an economic rebound once coronavirus-related lockdowns ease. But Europe’s capitals are split on how to raise cash for the fund, how the money should be distributed to member states, and what it should be used for.
Spain has issued a non-paper calling for €1.5tn in grants to hobbled member states, but northern countries reject the idea that an EU institution could borrow money on the markets and then hand it to governments who will not have to pay it back. Instead, the likes of Berlin and The Hague want aid to come in the form of loans which could be used for investment. Southern economies worry this will only saddle them with extra debt at a time when their borrowing is surging. A senior EU diplomat said:
“Northern EU states are against this idea of grants — the commission should not be running debts like this. Also running debts to hand out grants on the scale discussed does not look like a very financially sustainable idea and begs the question: Who will pay for it? Would it be seen as fair that a relatively poor country like Romania paid back parts of credits that were handed out as grants to Italy or Spain?”
Michel has written to EU leaders and called on the commission to come up with “a proposal that is commensurate with the challenge we are facing”.
There could be some hope of a compromise after Italy’s prime minister Giuseppe Conte — who has been vociferously pushing for coronabonds — indicated Rome would accept a tool where the commission is the borrower and governments get access to back-to-back cheap loans (h/t @DavCaretta).
As for the budget (MFF), EU officials tell the Brussels Briefing that Brussels wants to fundamentally revamp the first two years of the normal seven-year MFF, proposing a “budget on top of a budget” for 2021-2022. The four-stage plan involves first marshalling extra development money, known as cohesion funds, for the worst-hit economies.
Elisa Ferreira, EU regional commissioner, said Brussels was considering keeping a portion of regional aid funds unallocated at the start of the bloc’s next seven-year budget, allowing it to be directed to those bearing the brunt of the pandemic. “This could be done as soon as we have sound statistics; maybe within one, two years, we could really reallocate and help more those that suffered the most,” Ms Ferreira said at an FT/Bruegel event on Tuesday.
In another eye-catching plan, Brussels is also hoping to revive its eurozone budget tool — an erstwhile political priority for Emmanuel Macron that fell out of political favour due to resistance in the Hanseatic League.
EU officials tell the BB that as part of the second stage of the new MFF, the commission wants to beef up the so-called “Budgetary Instrument for Competitiveness and Convergence” to give “more targeted” assistance to stricken economies. Mário Centeno, eurogroup president, told MEPs on Tuesday that there was “a strong case to reflect about [the BICC’s] potential role and, naturally, to rethink its size”.
Brussels also wants to use existing spending tools to set up a dedicated healthcare fund in the MFF and use its fourth and final phase of spending on green and digital policy areas.
Pandemic news round-up
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Buying after Brexit
The UK has denied claims from Simon McDonald, the Foreign Office’s top civil servant, that the cabinet took a “political decision” not to join an EU drive to procure ventilators and protective equipment last month. The FT reports on how the government’s coronavirus strategy risks descending into chaos.
Holiday break
The EU should hold a special summit dedicated to reviving sustainable tourism in Europe, according to single market commissioner Thierry Breton. (Euractiv) Breton told MEPs that the pandemic was costing Europe €1bn a month in lost revenues and called for a special meeting of leaders to discuss how to come to the aid of tourism-reliant economies this autumn. Europe’s southern tourist hotspots are also raising concerns about their devastated industries. A Greek government official told the BB that prime minister Kyriakos Mitsotakis will push for a reference to the importance of resuming the free movement of people at Thursday’s summit.
Exit plans
The Netherlands has become the latest government to allow the partial opening of primary schools from next month, and relaxed restrictions on children playing sports and outdoor exercise. But lockdown rules on shops, restaurants and cafés have been extended for another three weeks. (Telegraaf) Spain’s government has come under fire for allowing under 14-year-olds to accompany adults to shops or the bank. Belgium’s Flanders region is pushing for an accelerated exit from the lockdown when the government announces its latest measures on Friday. (Euractiv)
Coming up on Wednesday
Europe ministers hold a virtual meeting to prepare the leaders’ summit and will discuss the rule of law in Europe.
[email protected]; @mehreenkhn
