The lockdowns that stopped the virus in Europe have had a devastating economic impact. Again, the American habit of dramatizing data by means of annualizing rates of change disguises the fact that economic implosion in Europe has been every bit as bad, if not worse. The U.S. economy fell 9.5 percent in the second quarter of 2020. Germany’s contracted by 10 percent. In Spain, the collapse was twice as bad, at 18.5 percent. (If Spain reported its data in the American style, it would be down 65 percent on the year.) [...]
In the process, the more conservative voices of Northern Europe extracted serious concessions. Unfortunately, those came at the expense of some of the more progressive and innovative budget elements, including spending on joint efforts in the areas of health care and green investment. Thankfully, the package is up for debate in the European Parliament, which is, step by step, asserting leverage over Europe’s politics. Earlier in the crisis, the Parliament favored a far more expansive plan, and hopefully it will make adjustments to the July compromise. [...]
This summer, there was certainly nothing inevitable about the way the deal was done. It did not seem likely. Credit goes to the European Commission for raising the stakes, upping the original suggestion by Merkel and Macron to an ask of 750 billion euros, on top of the regular 1.1 trillion euro ($1.3 trillion) multiyear budget. (It was the Commission’s officials who dug up the legal precedent that would allow the EU to justify massive borrowing.) Among national governments, one has to admire the Spanish and Italians, who began the long march toward a constructive European response back in March and suffered through the demeaning objections of Northern Europeans without walking away. The best that can be said for the Dutch and the Austrians is that they gave way in the end. Perhaps the shameless defense of the narrowest conception of national interest by Dutch Prime Minister Mark Rutte and Austrian Chancellor Sebastian Kurz will serve some useful purpose in dampening criticism from their domestic populists. [...]
It was not by accident that as the crisis deepened, the French government started its latest approach to Berlin not via the chancellery but by working its connections to the Social Democrats in the German Finance Ministry. In a desperate effort to revive the flagging political fortunes of the Social Democrats and his own chances of party leadership in 2019, Finance Minister Olaf Scholz had become the leading German proponent of European reform, pushing ideas both for unemployment insurance and banking. Both had been met by stony disapproval from the CDU and a nein from the chancellery.
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