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The 'My-country-first' virus

08 April 2020, Wednesday
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Will the European Union overcome the panic provoked by the coronavirus?  'Someone got his eye on the Italian gold', stated Matteo Salvini, the leader of the most popular party in Italy, the League party, in an interview with the television company SKY Tg24. He commented on the plan proposed by Germany and France. Their plan is to assist those EU countries, whose economies suffer from the coronavirus pandemic through the European Stability Mechanism (ESM).

Salvini noted that the ESM concerning Italy reminded of what has happened with Greece, when it had been bailed out by the EU member states. He also said that Italy was ranked third in the world for the amount of gold it had on reserve and that its gold with a value of 100 billion euro was being stored in the Bank of Italy.

The population is bothered about the fate of Italy's gold reserves. Last year, when Salvini served as the Deputy Prime Minister, he has already suggested to take control over the gold reserves and the Italian central bank and he has called for the elimination of Italy's central bank and the country's financial regulator, Consob. The institutions should be 'reduced to zero, more than changing one or two people' and that 'fraudsters' who inflicted losses on Italian savers should 'end up in prison for a long time'.


'The gold is the property of the Italian people, not of anyone else', said Salvini. However, his proposal to abolish the Bank of Italy had cost his post as a Vice Prime Minister and the splitting from the government.


The Institute for Economic Research in Munich estimates that 800 billion euros will be required to overcome the crisis in Europe. A group of states including France, Spain and Italy have called for Eurobonds to face the coronavirus crisis, but the German Bundesbank has balked at this idea. The bankers suggest to use the mechanism ESM, providing every country the liability on the disbursement of resources. Many European countries are doing a lot to neutralize the situation, including measures for the recovery of the market, for financial injections, for urgent credits, but this is not enough. More money is needed. Spain and Italy insist on introducing Eurobonds, but Germany, the Netherlands and Austria don't want to do this.

Furthermore, ESM loans are linked to rigid reform requirements and to strict controls by creditors, which might pose a risk to the safety of the country's gold reserves, according to Salvini. Now, most Italian politicians conclude that the situation puts them in a quandary: Either Germany will pay for all European members with the aim to overcome the consequences of the pandemic or the European Union won't exist anymore.

The British newspaper 'The Telegraph' reports that a group of Italian politicians, including members of Parliament and mayors took out a full-page advertisement in the German Frankfurter Allgemeine Zeitung. They urged Berlin to drop its opposition to a proposed EU scheme to issue so-called 'coronabonds' to raise funds to fight the crisis.

The Italian initiators of this action call for European solidarity, appeal for their common Western history and remind the Germans of the fact that other countries have aided them after 1945.

'Today the EU does not have the means to respond to the crisis in a unified front. If the European Union does not prove that there is a unified front, then it will cease to exist.', said Italian politicians

But will Germany listen to this warning? Germany's former vice-chancellor and minister for foreign affairs Sigmar Gabriel published a commentary on this topic on Project Syndicate:

'German politicians in particular want “Europe à la carte”: they want Germany to be an export champion in good times, benefiting from open borders and frictionless trade, but then turn inward in times of crisis. That is why the Eurogroup of eurozone finance ministers could not agree recently on joint aid for Italy and Spain.'

Simply put, COVID-19 is not the only contagion threatening Europe: While Italy and Spain struggle to contain the pandemic, the Eurogroup succumbed to the same 'my-country-first' virus that infected the Greek debt crisis a few years ago. Italy and Spain cannot shoulder the necessary financial burden to fight the virus and stabilize their economies. And if they can't shoulder the burden, it will be the end of the European Union.


'But perhaps the most dangerous consequence of the COVID-19 crisis is that citizens’ only protection is the nation-state. As a result, the coronavirus threatens not only people, but also international unification projects, including the European Union, which was established and painstakingly built to end centuries of war on the continent.', Sigmar Gabriel stated.


What is this German politician getting at?

And what choice will Germany make? 

 

Vladimir Malyshev

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