Italy’s political leaders from Left to Right have erupted in fury over the EU’s minimalist, insulting, and cack-handed response to the Covid-19 pandemic, warning that lack of economic solidarity risks pushing the bloc’s festering divisions beyond the point of no return.
“Don’t make a tragic mistake. The whole European edifice risks losing its raison d’etre,” said the Italian premier, Giuseppe Conte, demanding a giant Marshall Plan funded on the EU’s joint credit card to relaunch the productive system once the current nightmare is over.
Conte said anybody who thinks they can force Italy to accept disciplinary terms as a condition for loans – a sort of "Troika" regime – have gravely misjudged the mood of his nation. Italy will not take the money. “We will do it alone,” he said.
The message is that if there is no EU solidarity when it matters, then it no longer makes sense for Italy to accept EU surveillance and constraints, or for Italy to forgo use of its own sovereign policy instruments in self-defence. Europe’s pandemic strategy – every man for himself – may have unstoppable centrifugal consequences.
The warning was echoed by Jacques Delors, former Commission chief and euro godfather, who stepped back into the fray this weekend, denouncing Europe's paralysed response to the greatest crisis since the Second World War as a “mortal danger” to the European project.
Delors launched monetary union in the early 1990s on the implicit assumption that it would be the federalysing catalyst, leading – by means of crises – to full fiscal and political union.
This did not happen in 2011-12 when the banking/debt crisis exposed the euro's unworkable structure. Northern creditor states blocked moves towards joint debt issuance and a proto-EU treasury, precisely because such moves have huge constitutional implications. They imposed the stick of disciplinary controls but never delivered on the other side of the political bargain, a banking union and more fiscal sharing.
This has left the European monetary union system acutely vulnerable to the coronavirus shock. The European Central Bank lacks the instruments – and legal authority – to rescue the euro project on its own in an economic crisis of this kind.
The fundamental issue, ducked for two decades, is coming to a head as the eurozone productive system freezes for months. This earthquake makes the long-simmering showdown between North and South far more dangerous. Whether the EU survives may be determined by decisions made over the coming weeks.
Delors and French president Emmanuel Macron are seizing on events to ram through their arch-integrationist ambitions. But they have run smack into the equally entrenched views of the "frugals", or the Hanseatic bloc.
Dutch premier Mark Rutte has become the spokesman for the hardliners - giving political cover to Germany – categorically ruling out emergency "coronabonds" or other forms of debt mutualisation. “It would bring the eurozone into a different realm. You would cross the Rubicon into a eurozone that is more of a transfer union," he said. “We are against it, but it’s not just us, and I cannot foresee any circumstances in which we would change that position.”
Enrico Letta, Italy’s former-premier and an ardent EU integrationist, accused the Netherlands of leading the pack of “irresponsibles” and trying to “replace the United Kingdom in the role of ‘Doctor No’”. The reflexive use of the UK as a rhetorical foil evades of the true issue. It was not London that blocked moves to fiscal union over the last decade; it was Germany.
What is new this time is the emergence of a united "Latin Front" across southern Europe, with both Italy and Spain refusing to sign the EU summit conclusions on Thursday night after six hours of surreal discussions. They issued an ultimatum instead, giving Brussels 10 days to come up with a solution or face dire consequences.
Portugal’s premier said Dutch demands for stringent conditions on any credit line were “disgusting” at a time when Europe is facing both a humanitarian disaster and an economic shock beyond anybody’s control.
This Latin alliance never got off the ground in 2011-2012. Conservative Spanish ministers – aspiring to be the "Prussians of the South" – refused to be linked with Italy. Chancellor Angela Merkel was able to impose Germany’s austerity doctrines by divide and rule, and through control of all key policy instruments.
While some in the creditor bloc are resorting to the same misplaced "morality" rhetoric of that episode – blaming the victim nations for being ill-prepared because they are supposedly feckless – the emotional reaction this time is ferocious and the reserves of pro-EU sentiment are thinner after a decade of austerity and and worse unemployment than the 1930s.
Lega strongman Matteo Salvini called the EU a “den of snakes and jackals”, warning that mounting rage would soon explode into an Italian national revolt. There will be a settling of scores when the virus is defeated, he said. Italy will wave goodbye to Europe if it has to – and “we won’t be saying thanks”.
Brussels is used to hot words from the Lega and the Fratelli d’Italia, the nationalist "Italy First" government in waiting. It may be more worried by warnings from a string of pro-European statesmen is that this crisis is testing Italian political consent for the EU project itself.
“I hope that everybody understands the grave threat facing Europe,” said President Sergio Mattarella in an address to the nation. “There has to be a common EU instrument before it is too late.”
Even former premier Mario Monte – the voice of Europeanism in Italy – wrote in Corriere della Sera that it is time for his country to issue a threat: Rome should tell the Germans that unless there is a move to joint EU action they must assume that the ECB will instead do the job by printing money and unleashing a second “Weimar hyperinflation”.
The hyperbolic tone is bizarre from a man of such cultivated statecraft, but it shows how quickly events are moving. Monte is in effect warning that the Latin Front and its allies will use their majority power over the ECB to ram through fiscal union by the back door.
By all accounts, the summit on Thursday night was extraordinary. Angela Merkel, who is self-isolating, posted a picture of herself instead of appearing on the videolink screen and was eerily absent for most of the discussion. Faced with vehement demands, she icily reproached the Latin Front for raising hopes for coronabonds that can never be fulfilled.
Merkel warned that no such proposal would make it through the Bundestag even if she agreed. Germany’s top court has already ruled that eurobonds would require a change to the German constitution – near impossible in the current fractured political landscape.
Macron told the gathering that Europe cannot go on as it is. Something will break. He tried to persuade Merkel that the amount of joint issuance is not important. It can be a token sum – what matters is the gesture.
But in arguing this, he gave the game away. His ulterior purpose is to exploit the pandemic to establish a new fact on the ground: fiscal union. That is why Germany is digging in its heels.
Italy’s official death toll has surpassed 10,000 but mayors from the hotspots of Brescia and Bergamo say the real figure is multiples of this number.
Germany is airlifting the critically ill from Italy to hospitals in German regions with spare capacity. Solidarity is coming through at last. But the damage done from the early EU reflexes will endure.
When Italy invoked the EU’s formal disaster procedure with desperate calls for protective gear and ventilators, no country responded. Germany and France instead imposed export bans. The EU’s single market did not exist when push came to shove.
For the past 60 years Europe’s leaders have always found a way to overcome bitter divisions and keep the show on the road. They will probably do so again this time. But they have no margin for error.