European leaders to chart COVID-19 economic response plan

EU leaders meet via video chat today to continue discussions on the bloc’s COVID-19 financial exit strategy.

Specifically, they will deliberate on an expansion of the European crisis budget and look to ease the gridlock that has emerged over joint bond issuance.

The construction of a cohesive economic response has been complicated by the bloc’s stark geographic divergence in financial capacity. Countries like Italy, Spain, Portugal and France have called for the issuance of shared debt in the form of “coronabonds”. Wealthier opponents of shared debt—such as the Netherlands, Germany, Austria and Finland—argue that these bonds would effectively force their taxpayers to shoulder foreign debt. Strident northern conservatism has sparked outrage throughout southern Europe, which is struggling to cope with the pandemic’s ballooning economic fallout.

The hardline quarrel over common debt mutualisation is perceived by several senior EU officials as the perpetuation of a North-South divide that threatens the structural integrity of the European project, already undermined by the UK’s recent departure. Expect the coronabond issue to foment Euroscepticism throughout the bloc and complicate the EU’s upcoming action plan. Poorly coordinated easing across the continent—and resultant spikes in infections—will likely exacerbate political friction between member states and threaten their prospects for timely de-escalation.

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