The European Union is scrambling to find tools to offset the massive economic fallout of the coronavirus crisis – which could require a global effort. Last week, the EU Commission President Ursula von der Leyen said: “This global health crisis has a severe effect on our economies. “It is time to support our economies with determination. We need to focus on investing whatever is necessary to have the economy going on further.”
During a videoconference last Monday, eurozone finance ministers tasked the bloc’s bailout fund – the European Stability Mechanism (ESM) worth €410billion (£381billion) and set up after the 2008-09 financial crisis – to consider ways of tackling the economic fallout of the outbreak.
The President of the eurogroup Mario Centeno said after the six-hour online meeting: “We will do whatever it takes and more to restore confidence and support a recovery.
“We will protect our citizens and our currency. Come what may and with everything we have got.”
Ministers have, for now, stayed clear of specifically calling for ESM to have a role in dealing with the crisis, though.
The use of the EU’s rescue fund could be premature, some argue, and could only aggravate the crisis.
As uncertainty continues and the crisis deepens, leading economist and former Greek Financial Minister Yanis Varoufakis brilliantly explained everything wrong with the EU’s economic response to the pandemic.
In a video posted on his YouTube channel DiEM25 last week, he said: “The other day there was a eurogroup meeting.
“The meeting of the European Union’s finance ministers of the countries that are using the euro.
“They decided that coronavirus poses a clear and present danger of a massive recession in Europe.
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“They said it is a highly significant threat to European economies.
“So much so that the urgency was so great that they decided to do absolutely nothing.
“They decided they are going to monitor the situation and watch.”
Mr Varoufakis noted: “The eurogroup, the EU and in particular the eurozone are terribly structured.
“They are on autopilot.
“They simply follow particular rules that cannot be followed without racking our economies. It is a reflection of a system that has been created in order to prevent governments from acting on behalf of society.
“That is if you want the ‘neo-liberal kernel inside Europe’.”
Mr Varoufakis added: “They are talking about doing whatever it takes within the fiscal compact, which means nothing because the fiscal compact is like an iron cage austerity from which you then cannot escape.
“And you need to escape from an iron cage of austerity if you are going to do anything about the green transition or about dealing with with the wholesale recession that the coronavirus is going to bring again to Europe.
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“A Europe that has fallen behind the rest of the world as a result of such stringent austerity package that increased in 2010 and spread out like a cancer out of control throughout the European Union.”
In an interview on Sky News this morning, the former Governor of the Bank of England Lord Mervyn King echoed Mr Varoufakis’ claims and noted that Britain should be very grateful it is not in the eurozone right now.
He said: “What we can take comfort from here I think is that the Bank of England and the Government are working very closely together.
“I think you can see that around the world nations are responding to this. People have to accept that tremendous sacrifices are made for other people. And the community in which we do that most naturally is the nation state.
“That is not something they have created in the euro area.
“They failed to create a fiscal union.
“Now, someone will hope that the crisis we are facing will lead them to do that but they have not got the political legitimacy to do that.
“We should be really grateful that we are not in the euro area and that we can coordinate our responses directly between Central Bank and Government here in Britain.”
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