February 27, 2020

EUROPE: Coronavirus response in the hands of national governments

BY Antonio Barroso, Carsten Nickel, Luis Cornago

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( 4 mins)
  • As the coronavirus spreads, the focus has turned to the potential responses by European Union (EU) policymakers.
  • The politicization of borders after the 2015 refugee crisis serves as a reminder of the potential risks around border closures.
  • Beyond a flexible interpretation of EU spending rules, a coordinated fiscal response remains unlikely.

On the technical level, the European Commission is using existing instruments to ensure the exchange of information between governments and push for a coordinated approach. National governments, which remain ultimately responsible for health policy, have developed a similar range of responses so far. Far-right politicians’ attempts to exploit the issue to push for border closures (for instance, by Marine Le Pen in France and Matteo Salvini in Italy) have been unfruitful. Member states have adopted a cautious approach towards potential curbs, in line with the Commission’s preference for any restrictions to be implemented proportionally and in a coordinated manner.

Political Schengen

75% of Europeans believe that the Schengen zone of passport-free travel is good for business in their country, and 68% see it as one of the EU’s main achievements. Together with the economic benefits, this might explain why member states have so far been reluctant to impose temporary border restrictions. In a polarized political landscape, however, such technocratic and economic approaches are continuously being challenged. Moreover, public opinion varies across countries. In Italy and France, for instance, people are less enthusiastic about Schengen than elsewhere. These disparities are signposts to watch as governments try to devise the next steps in fighting the virus.

EUROPE: Coronavirus response in the hands of national governments 1

The experience of past cross-border emergencies suggests that domestic politics could perhaps incentivize leaders to change track if the outbreak were to intensify. The example of the 2015 migration crisis is a case in point. The Commission did not have the power to impose a common approach to the issue, while the domestic politicization of migration led several governments to reject a joint response. They opted for the unilateral imposition of border controls instead. The effects extended well beyond the peak crisis period, with countries continuing with random border checks.

International health authorities have warned that unilateral travel restrictions are ineffective in containing the spread of the virus. Still, the experience of the migration crisis suggests that curbs could become more likely if one member state goes ahead, thereby raising the pressure on other national governments in a chain reaction. Note that the introduction of border checks remains an exclusive prerogative of member states; the Commission can issue an opinion, but it cannot veto it.

Exceptions become the norm

Economically, temporary border controls introduced during the migration crisis had mild negative effects. Considering all border controls established since the summer of 2015, the overall goods and services trade of EU-28 countries declined, on average, by 1.3% compared to the status quo in 2011. If border controls were to be reinstated, they would likely further add to any negative economic consequences of the virus outbreak.

Regarding the expected economic effects, a concerted approach in the form of fiscal stimulus remains highly unlikely. Northern Eurozone members remain concerned about risk-sharing and have worked hard to ensure no common budgetary resources are devoted to stabilization purposes, much to the chagrin of southern members demanding risk-reduction. Countries with larger fiscal spaces also remain politically reluctant regarding domestic stimulus measures.

Instead, the Commission is likely to once again use the exceptional situation of the outbreak to provide countries with marginally greater fiscal space. In the meantime, the EU is reviewing its fiscal rules, following complaints from several member states about their utility and complexity. But even if a revision were to lead to more investment-friendly rules, these are unlikely to materialize quickly enough to help deliver a response to the economic consequences of the coronavirus outbreak.

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