European federalism and the coronavirus recovery: an interview with Sandro Gozi

Since the outbreak of the coronavirus in Europe, one of the main, and largely predictable, political responses from both left and right has been an increase in anti-EU sentiment. Many have argued that the institutions have reacted too slowly, and, in various cases, shown a marked lack of solidarity in assisting the worst affected parts of the continent. While much of this argument is based on valid reasoning, some of the discussion in recent weeks has been based on misinformation, fake news, and a lack of understanding about the nature of the problem at hand.

Sandro Gozi, an MEP, and ardent European federalist, remains convinced that international coordination, within the EU, remains the best response to this current dilemma. Following a career in Italian politics, with the centre-left Partito Democratico (PD), Gozi joined Emmanuel Macron’s ‘En Marche’, in France, in 2018, and was elected to the European parliament in May 2019, as part of the transnational ‘renaissance’ group. Last week I called him up to talk about the strengths and weaknesses of the European response so far, and the challenges, and opportunities, that the EU will face in the future as part of the coronavirus recovery. The following is an edited version of our conversation.

JM – Let’s start going back in time a little, to the peak of the Southern European emergency. At the start of the crisis, when Italy was disproportionately hit, many felt the response from certain neighbour member states was inadequate to put it lightly. Do you think that was a fair feeling?

SG – Absolutely. At the beginning of the crisis there was in general an undervaluation by everybody and the European union as such, as to the seriousness of the crisis, and the need for solidarity actions. Especially in Germany and the Netherlands the governments and parts of the press acted as if we were in 2010 during the financial crisis. In general, the approach was “we don’t want to pay for the Italians,” which was a logic that is totally detached from reality. It’s clear the virus is a transnational threat which is hitting everybody, and that we’re only at the beginning of a crisis which is spreading around the globe.

The EU itself did not act quickly enough. There were errors in communication. Initially Christine Lagarde said the ‘spread’ (The extra yield that investors demand on Italy’s 10-year bonds over comparable notes in Germany) was not the concern of the ECB. Ursula von der Leyen published an op-ed in the Corriere della Sera, at a time when Milan and Lombardy were already at the centre of the crisis, without once mentioning the coronavirus. When Italy asked to activate the civil protection mechanism of the EU, nobody answered. So at the very beginning there were mistakes in communication and a slowness and action on the part of the EU. That said, I do think a new conversation is beginning to develop, especially in Germany where they are realising they are obliged to make some kind of move.

JM – One of the most striking images that spread around the world at that time was of Russian, Chinese, and Cuban aid arriving in Italy. The Italian government and media class were, perhaps understandably, happy to receive it. To what extent was this a case of global powers trying to exploit divisions within the bloc?

SG – China but especially Russia were trying to take advantage of this situation, to try to influence public opinion in Italy and elsewhere. I think Giuseppe Conte was wrong to court their strategy. The Italian government welcomed the aid with cameras and pompous declarations. They presented it as a gift from China. In fact this was an illusion: these were products made in China, yes, but by Italian firms. The Italian government paid the firms and also paid the Chinese government to transport the goods using their own planes. It’s a strange paradox. Luigi di Maio, (Minister of Foreign Affairs of the governing Five Star Movement (M5S)), is a nationalist leader, but he didn’t put an emphasis on the great tole of Italian firms abroad. Instead he hid the role of these businesses and celebrated China and the Chinese government.

JM – Why do you think they would do that? Was it just a tactical bluff to focus the minds of northern finance ministers? Or was it indicative of an actual drive to undermine the EU and get closer to other international powers?

SG – I think a good part of the Five Star Movement are deeply nationalist: they want to pursue a nationalist agenda and have close links with China. Alessandro Di Battista (one of the most prominent figures in the M5S), has said in two interviews now that Italy should threaten to leave the EU. Conte is lacking political experience, and he is not up to the task of managing this situation. He has dramatized what has indeed been a dramatic emergency. But he has also dramatized the response by the EU, exaggerating its problems. We were all concerned about the slowness, and his reaction didn’t help. Conte wanted to make the Italian public believe their enemies were France and Germany, and their friends China and Russia. Now the government is realising it was a mistake, and this is limiting its influence in ongoing discussions. In the past few days they’ve been scrambling to make amends. Top ministers have been reiterating that Italy wishes to maintain its alliance with NATO and the EU, which should be something obvious. For me this is a sign that Conte is not able to govern. I also think he’s underestimated the impact this kind of behaviour has had on public opinion…

JM – Across Europe a lot of journalists and politicians have been drawing parallels with 2008/10, and the sovereign debt crisis in particular. Do you think these moments are comparable?

SG – The crisis this time is much more serious. In 2010 the effects hit some members of the eurozone very hard, and Greece in particular. That was considered to be a consequence of mistakes made in the running of the economy in particular countries. The risk at the time was that the crisis could spill over from Greece or Italy or Portugal or Ireland to the rest of the eurozone. Today we are facing a substantially different situation. This is a crisis which has hit Europe and the eurozone as a whole, and which will create a dramatic drop in GDP for all of the EU. This recession is going to hit the heart of the European economy – Germany – so it’s a crisis that effects the whole continent. This is another reason the reactions of the Germans and Dutch, are totally misplaced. This time we all face the same crisis, and it’s impossible to argue it is the consequence of rational mistakes in the running of a given country and economy.

JM – Another difference from that period is the scale of state spending that has been required to keep businesses, and individuals, afloat. Some are suggesting this is a prelude to some kind of broader ‘socialism’. Others that it is a short-term bailout that benefits powerful companies, and is, in this sense, an implicit form of austerity. What’s your take on it?

SG – I hope the debate won’t be between austerity and socialism, because in my view they are both wrong answers. They are both answers of the past. Socialism is an answer from the past century. Austerity an answer from the past two decades. What’s clear is that there is a strong need for a massive public intervention in the economy, both at national and at European level. To rebuild as quickly as possible, we need to inject liquidity into the economic system. We need to give money to small entrepreneurs, and to support the sectors which will suffer most, like tourism. This job cannot be left to the private sector. It requires an investment plan, but also a social plan as we are going to face serious problems, and unrest, in the months to come.

After initial delays, Europe has reacted well in this second phase. We have learnt how to better use the tools we have available. We have suspended the stability and growth pact, we have modified and applied the state aid rules in a much more flexible way to allow governments to inject liquidity into the economy. We have decided to put the European stability mechanism at the disposal of all the member states to recover their health costs. We have freed the lending capacity of the European investment bank. We have allocated EUR 37bn to be used by regions, with considerable flexibility. These are all steps in the right direction.

JM – This makes sense in terms of the immediate crisis, but this will cost a huge amount of money. What about the next steps, the medium term, and need for a spending plan, and debt-management scheme of some kind?

SG – This crisis is so extraordinary that we need new instruments. Fresh money is needed, to fuel a real, effective economic plan. EUR 2tn is the figure we should aim for. At a bare minimum we need to mobilise EUR 1tn. Since the beginning of the crisis I’ve been pushing for a ‘recovery bond’. I’ve been insisting on this name in particular. There’s been a lot of talk about ‘eurobonds’ or ‘coronabonds’. But if you talk in these terms in Germany or the Netherlands, the message you give is that the German taxpayer or Dutch taxpayer will pay for the Italian or French debt. This, quite simply, will never fly. ‘Recovery bonds’, on the other hand, consider the specific difficulties that some countries are facing in relation to this particular moment.

The proposal we’re working on in ‘renaissance’ is to say no, we don’t look at the past, we don’t look at the existing national debt. We will use the European budget as a guarantee to produce new common European debt that we can put at the service of a new common investment plan. Then we can go on the market at a very low interest rate and give loans and grants to countries most affected. It’s important here that we remember that public debt is not all the same. Debt that goes to corruption, to bad administration, and management is obviously bad. Debt that goes to healthcare or environmental measures is good, because it makes a better society tomorrow and, in the long run, it helps the economy to grow. We have to develop a new approach to public spending which is there to reach a common objective: we want a green deal, we want an ecological transformation. To carry out an effective recovery action we need to develop new common actions at a supranational level. There is a strong link between the economic and social recovery action and a new phase of the institutional and political integration of the EU.

JM – What would this mean specifically with regard to healthcare? How can transnational approaches help prevent the kind of problems, and inequalities, we’re seeing now?

SG – We have to introduce more binding and more effective mechanisms of cooperation in the event of health crises. If a crisis hits a region of Europe so much that we don’t have capacity in hospitals, patients should be automatically transferred towards other regions and other countries. We’ve seen this at a very small scale in this crisis, but we need rules and protocols. We have to introduce more binding and transparent mechanisms. Then there is the question of sovereignty. One key sector, the pharmaceutical sector, has an excessive reliance on other parts of the world. In this case it is substantially delocalised to china. We have to recover strategic autonomy here, and other sectors, as this dependence is something which is geopolitically dangerous, and not only for health.

This is easier said than done. We have to ask ourselves why the pharma industry has moved so significantly away from Italy and Germany to China. There are structural and economic and labour market issues we need to rethink if we want to attract industries that have delocalised in the rest of the world. It must be a priority. This is something that we in the parliament will have to work at for the whole legislature, until 2024, because it requires new incentives for industry, new rules for the single market, and less bureaucracy. Some of these are aspects will have to be tackled at an EU level, but there’s a lot to be done as well at national level to make the single market attractive again.

JM – Public opinion of the EU is declining in many parts of the continent and has been doing so for over a decade. Various projects, like Yanis Varoufakis’s Diem25, have tried to argue for a more integrated version of Europe, and have invariably faced a brick wall. How do you see this situation changing?

SG – If Europe shows that it really is there to make a difference on the economic recovery, on the social recovery and to become leader of the ecological transition, this will make a difference. This is particularly true of the young generation. I predict the nationalists will be strongly against the ecological transition and green new deal. Politics is changing. Issues of how we manage digital innovation, what do we do against climate change, what do we do about rule of law, are major cleavages. The answer to the economic recovery is a chance to show that Europe is the frontrunner of societal innovation for more just and equal societies.

Part of the recovery must be a democratic recovery. The Brexit slogan ‘take back control’ was based on a fair question. The answer was wrong. The solution is not to go back to nationalism and national policy. It must mean building up the capacity of governance, and democracy, that we have lost at another, transnational level. European citizens must feel that if their government violates the fundamental rule of law there is another level that is beside them and which will protect them. People are not only Italian or Polish citizens, they are also European citizens, and the EU must do more to protect their fundamental freedoms. This, in my view, is a way of promoting a democratic and sovereign Europe, which can talk to the people.