After the pandemic: A new beginning for Europe?

The first is that after the end of a nightmare, nobody wants to think about it. We all know what happened after the previous pandemic, the Spanish Influenza of 1918 - which in turn had succeeded World War I (and which it had even rivalled in terms of number of victims): “Roaring 20s”; Crazy parties, "Anything goes", hunger for life. In Europe, Weimar Republic, Red Vienna, March on Rome. In the United States the Prohibition era and Al Capone. We also know what happened next: speculation fever, Wall Street Crash, Great Depression. Thereafter, World War II, just twenty years after the end of the previous Great War, "The War to End all Wars. "If we go back to the previous "normality" it will not be the first time. We have proved in the past to be incapable of learning from our experiences.

The second reason is the power of path dependency. We are captives of our experiences. We look to the future with the lenses of the past. Our previous decisions condition the next. One of the lessons of the Greek crisis (2010-18) is that the country was trapped in an equilibrium that was incredibly detrimental to the common interest, and at the same time incredibly stable. Low trust and the difficulty of coordinating opposing (or divergent) aspirations made it difficult to get out of the crisis. In addition, the common interest is in fact the component of various interests. Some of the various interests benefit from perpetuating the current equilibrium, and marginalize supporters of a better alternative. Finally, we often lack even the language to imagine something different from what we are familiar with. The unknown frightens us. We find it difficult to think the unthinkable. Our choices are guided by certainties of the past that have meanwhile been rendered obsolete. For example, the statements of some European finance ministers at the beginning of the pandemic brought to mind what J.M. Keynes wrote in 1936: “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist”.

The third reason is that an emergency makes some capable for the best, and others capable for the worst. The initial reactions of some European politicians to the tragedy unfolding in Italy last March were woefully misguided. (Europe’s enemies must be rubbing their hands with glee!) And yet, it was not difficult to find the right words at this dark time. The European Greens have done so, and the author of this article will always be grateful for that. The declaration of 27 March 2020 started as follows: “We express our heartfelt sympathy with all those who have been infected by the virus and are fighting for their lives as well as with their families and friends. We share the grief of those who lost loved ones to the illness. We affirm our solidarity with and deep appreciation for those who are risking their lives in caring for those affected by the virus. No one can underestimate what contribution they have made to our societies. This should not and will not be forgotten.” It was not difficult, but it nearly never happened.

The route to recovery

In the end, of course, it did happen. Although somewhat belatedly, the European leaders have responded to the critical moment. The European Commission's proposal towards the establishment of a European Recovery Fund, the joint initiative of Angela Merkel and Emmanuel Macron, along with the European Central Bank's quantitative easing programme, outline a response that would indeed rise to the occasion. It remains to be seen whether the Summit will seal the agreement, and whether national governments will be able to manage unprecedented financial support with effectiveness and integrity.

The magnitude of solidarity of Northern member states, and the quality of the use of European funds in the South, are intimately linked to, and feedback on, each other. The take-up of European structural funds that had been made available to Italy (the country where I live and work) for the period 2014-2020 is currently at 29%: the remaining 71% (38 billion Euros) is at risk of being lost, or has already been permanently lost. Of course, the issue is not how to maximise the take-up of funds at all costs - in Greece too we have seen the distortions to which this logic leads. The issue is the capacity of public administration and political and business elites to design and implement long-term investment programs. This capacity (in Italy as well as in Greece) remains low today. It must be strengthened urgently.

But it is also true that the main reason for the rise of populist Euroscepticism in Italy is that the country has not benefited as much as others from the Economic and Monetary Union. Following the fiscal excesses of the 1970s and 1980s, which recklessly inflated the national debt, Italian governments from the early 1990s have managed public money with admirable rectitude, achieving a primary budget surplus (after the deduction of the costs of debt servicing) each year, with the sole exception of 2009. No other European country - not even Germany! -- has shown such consistent performance. The price of a quarter century of continuous austerity is right in front of our eyes: long years of neglect of public infrastructure (roads and airports, but also schools and hospitals), resulting in a sluggish economy. The Eurozone crisis in Italy did not have the dramatic consequences it had in Greece, but it further slowed down economic activity: in 2009-2019, average annual GDP growth was +0.2% in Italy, compared to +2.0% in Germany. It is clear that the architecture of the euro falls short of providing equal opportunities for prosperity to all countries.

That is why it is so outrageous that so many people in Germany (and in the Netherlands and elsewhere) are still thinking of Italy (and Greece, and other Southern countries) in terms of the  trite old stereotypes: the ant and the grasshopper. The truth is a little more complex.

Acceleration of earlier trends and new challenges

Meanwhile, those responsible for setting priorities and planning recovery policies are facing new challenges. The pandemic and the lockdown (as well as the gradual, slow and asymmetrical restart of economic activity) have formed a new landscape, which we are all forced to confront.

In some cases, new challenges are accelerating trends that were already manifest before. The data from Italy, the USA and elsewhere show that the closure of schools has widened the digital divide between those children who have a computer, good internet connection, their own room, and books at home, and those that have none of these. When schools reopen, and all children return to class, the less privileged students will have fallen behind their luckier classmates.

Also, the lockdown revealed another gap, among those who continued to work from home, and those employed in jobs unsuitable for teleworking, and were therefore more affected. The former tend to have higher education, stable jobs and better salary. The latter already belonged to the more vulnerable social groups, and now face higher unemployment and higher earnings losses. In other words, the pandemic threatens to further increase income inequalities.

Some other developments deviate from previous trends, not yet clear whether temporarily or permanently. For example, economic research has long shown that technological change replaces repetitive routine work tasks, destroying middle-skill jobs (e.g. industrial workers). At the same time, it creates new jobs, falling into two categories: on the one hand, well-paid jobs for high-skilled occupations, with technology-complementary skills (i.e. in research or programming), and on the other hand poorly paid jobs for low-skilled occupations, with skills that technology cannot replace (yet?) (i.e. care for the elderly or children). Until recently, employees in personal services earned low wages, but at least faced favourable employment prospects. The restrictions on movement due to the pandemic have disproportionately affected both their earnings as well as the probability of keeping their job.

In some cases, mass teleworking has shown that progress made in recent years, while undeniable, has not yet completely eliminated outdated modes of behaviour. For example, the data of "time use survey" in Europe and elsewhere show that younger, more educated couples share fairly the childcare and other household chores. However, compulsory confinement at home due to coronavirus has shown how unequal is still the distribution of unpaid work time between men and women - even in social groups above suspicion, such as young scientists. Recent research shows that in the last few months the productivity of female scientists, as shown by the number of scientific publications, declined. In contrast, that of men increased.

Some other changes were even more unexpected. If more and more Europeans continue to work mainly from home, going to the office i.e. just one or two days a week, then the terms of the trade-off between a smaller apartment downtown and a short walk to work, versus a larger house out of town and a longer commute, will shift in favour of the second option. This will obviously affect the housing market. From a business viewpoint, the same development will make it less necessary to rent large office spaces in the city centre, thus affecting commercial real estate. Some of these developments will be negative: The cities we love (and where most Europeans live) are dense, with good public transport, good bars and restaurants, theatres and concert halls. Nobody knows what will happen to all that. Could those be right who claim that the pandemic has set in motion developments that are bound to cause cities to decline?

Europa felix in an unstable world

However, the same developments have a positive side, too. We are certainly not going to miss the home detention of recent months. But some experiences will remain in our memory. The fresh air in the city centre. The peace and quiet. Birds chirping. The verdant green, brighter this spring. All these offer a glimpse into the blurred outline of another life, another way of organizing everyday activities. Is this alternative world feasible? It depends. Every urban renovation project (i.e. the pedestrianization of the historic centre) is at first met with grumbling. However, once renovation is complete, no one considers returning to the previous state. Cities with bicycles, kids playing on the street, young people running, friends walking, elderly people strolling without fear of being run over, are more civilized, more pleasant, more attractive - and ultimately richer - from those that have surrendered to the motor car. The most enlightened municipal authorities will recognize that city dwellers are not interested in returning to the normality of traffic jams, and will invest in "smart density”.

The (cautious) optimism about the new horizons that are being opened is offset by the indisputable fact that the geopolitical environment has darkened for Europe. The weakening of democratic institutions in Hungary and Poland; the menacing presence of authoritarian states on its borders, such as Russia and Turkey; the rise of Chinese influence, a superpower that despises (and violates, where it can) the democratic freedoms that Western citizens take for granted; the sad decline of the United States, which may be arrested or consolidated, depending on the outcome of the November 2020 presidential election.

In this volatile and dangerous environment, the question for Europe is how to become stronger, politically and militarily, in order better to defend itself. And at the same time, how it will be more itself, leading global cooperation to tackle global challenges: the fight against poverty, the digital revolution, and climate change. Remaining the most peaceful, freest, safest, most prosperous, and happiest continent in the world.