Significant economic contraction in the EU, resulting from the COVID-19 pandemic, will strengthen the allure of the Eurosceptic message on the continent. To quell the popularity of Eurosceptic populist parties, EU institutions will be compelled to adopt an uncompromising stance in negotiations with the UK.
The economic impact of COVID-19 across Europe is exacerbating fault lines at the heart of the EU project. Despite EU finance ministers agreeing to support a €540bn package to support the bloc’s ailing economy, the proposal of ‘coronabonds’ – a financial mechanism that would serve to mutualise member state debt – has been strongly opposed by decision-makers in Berlin, Amsterdam, and elsewhere.
Opposition to greater pooling of financial risk is nothing new. During the debt crisis post-2008, the bailouts and accompanying conditions handed to countries such as Greece created huge friction between the northern and southern Eurozone member states. Monetary union without fiscal union posed a threat to European solidarity, whilst stoking the embers of Euroscepticism in Europe. Many of the underlying issues from that crisis remain unresolved, and so similar tensions could easily re-emerge.
The Populist Opportunity
This curbing of economic agency has long been utilised by populist leaders, such as Matteo Salvini of Italy’s Lega Nord and Marine Le Pen of the Rassemblement National in France, to argue that the EU imposes unacceptable limits on national sovereignty.
Such criticisms are part of a broader populist narrative that the European project is inimical to national interests, with both Lega and RN frequently stoking anti-immigration sentiment through their criticism of the principle of freedom of movement.
Both Salvini and Le Pen have established their parties as serious contenders for governmental leadership in recent years. The inevitable economic slowdown resulting from stringent lockdown measures imposed in response to the coronavirus pandemic will serve to benefit these populist parties. According to projections from the IMF, France’s economy is expected to contract by 7.2% in 2020, with Italy’s economy contracting by 9.1%.
In Italy, in particular, an anti-EU shift in public opinion is striking. According to recent polls, 88% of Italians feel that Europe is failing to support Italy in the crisis, with 67% of Italians considering EU membership a disadvantage. If such trends continue, the legitimacy of the European project itself is at risk.
The EU’s double bind
European leaders are highly aware of this risk. On 16 April, Macron suggested that a failure by the EU to agree on how to fund a coronavirus relief package would threaten the EU as a political idea. His view appears to anticipate the credence that such a failure would lend Eurosceptic populist parties in Europe.
This challenge reveals an inherent contradiction at the core of another existential threat to the EU: the bloc’s future relationship with the UK. With the transition period due to end on 31 December 2020, the EU cannot afford to appear too flexible to UK demands at a time when Eurosceptic populist parties will be reaping the benefits of the economic fallout of the coronavirus crisis.
Conversely, if projections from the IMF prove correct and the EU economy shrinks significantly, an agreement allowing continued frictionless trade with the UK, mitigating against further economic damage, may begin to look attractive.
EU leaders thus find themselves in a double bind of economic versus political logic. Compromise too little with the UK, and the EU will find itself exacerbating an already deeply challenging economic situation, inadvertently emboldening the Eurosceptic message of EU economic impotency in the process. Compromise too much, and the EU will reinforce the legitimacy of the Eurosceptic vision that the economic benefits of the bloc can be decoupled from the political structure that underpins the European project.
Statements from Michel Barnier and European leaders suggest that, faced with this trade-off, the EU is incentivised to choose politics over economics. Since the outset of Brexit negotiations, the EU has not wavered on its red lines, making compromise at this stage seem unlikely. The possibility of the EU offering the UK an extension to the transition period has been mooted, with the aim of offsetting further economic uncertainty. Even if such an extension is accepted, however, the underlying political paradox will remain fundamentally unaltered.
Without defining a meaningful difference between the benefits afforded to members and non-members of the EU through the medium of the Brexit negotiations, populist parties will continually espouse the message that they can be next to successfully depart the bloc. The EU, faced with this existential challenge, will choose a stance that expresses political strength over economic flexibility.
Antonio Tucker holds a Masters in International Relations from the University of St Andrews