The European Council decided during a summit organized to address the COVID-19 crisis on 23 April to confirm a European Commission program to support national insurance systems. They also approved a program by the European Investment Bank to support lending to small and medium-sized enterprises, and another by the European Stability Mechanism to make loans available to national governments to pay for health care expenses related to the pandemic. Finally, the Council asked the Commission to set out a roadmap for the creation of a ‘recovery fund, which is needed and urgent’. Supporters of the decision hailed it as an unprecedented leap toward a Europe of solidarity; critics decried it as vague and insignificant. They are both wrong and right at the same time.
The European Council will meet by video conference next Thursday. When it does, the three main items on the agenda will be to approve the recommendations made by the Eurogroup on 9 April, to push forward the conversation about a European Recovery Fund, and to restart and restructure the talks about the upcoming multi-annual financial framework. In English, that means the conversation will be about money. Like any conversation about money it will be difficult. The opportunities for misunderstanding are everywhere. Now is a good time to sort out some of the issues.
I am an American – an outsider – not a European. I have been studying and living in Europe for a while; I wrote my doctoral dissertation on Dutch politics; I spend more time now looking at politics in Italy. Alongside that political interest, I have spent much of the past thirty years looking at European monetary integration. Europe has taught me a lot, but there are still many things I find confusing. Top of the list right now is that the governments of the euro area would rather accept a higher shared risk in the ECB than they would face if they agreed to share risks through an institution specifically designed to raise credit in the markets. This strange choice about how to share risks matters because the risks the European face have never been greater.