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April 08, 2020

Is Greece ready for virus spread in migrant camps?

Refugee camps are particularly vulnerable to the Covid-19 pandemic. As they are overcrowded and have poor sanitary conditions, an outbreak of the virus could spread like a wild fire. NGOs and the WHO are ringing alarm bells for the refugee camps in Africa. In Greece the EU is pressuring the government to disband congested island camps hosting more than 40,000 migrants. They urged the government to accept the EU's assistance to rehouse the camp populations in hotel accommodation.

There is a catastrophic health crisis in waiting, warns Macropolis. Last week, the Greek government put two migrant facilities on the mainland under quarantine after some of the inhabitants tested positive. There is an official strategy to deal with a potential outbreak in camps that includes testing and contact tracking. But critics warn there is not enough effort on prevention, and the measures would be hard to implement in overcrowded camps like the ones on the islands. Migrants who arrive on the islands have to self-isolate for 14 days but there is no shelter for them to do so. Confinement measures also make relocation of migrants to the mainland difficult.

And then there are 600 migrants waiting for deportation after Greece suspended its asylum procedures in a standoff with Turkey. They cannot go anywhere and are living currently under inhumane conditions.

This is also politically explosive. Tolerance for migrants had already waned before Covid-19, as the government planned to relocate migrants. The situation got worse when Turkey opened its borders and encouraged migrants to make their way towards Greece. The lockdown just adds to the pressure. Greeks have to shoulder yet another economic contraction when they were just about to turn the corner. Poor economic prospects and job losses are unlikely to foster tolerance for a potentially catastrophic heath crisis in migrant facilities.

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April 08, 2020

On the future of the EU - the final part 12 of our series

This is the last of a dozen. The imperial metric may be an ominous sign for a discussion on the future of Europe. We will not conclude with a forecast, or indeed a lament about the state of European integration. It is what it is. Our focus today is on the scenarios awaiting the EU after this crisis is over. Where does this leave the EU?

Let’s first deal with three benign scenarios. The first is for a version of a coronabond yet to be agreed, sufficiently large to produce the needed fiscal uplift for the whole of the eurozone. We can hardly think of anything more important for the EU to do than to act in a crisis that member states are unable to cope with on their own. Most euroscepticism these days is not based on ideology, but on a loss of confidence and lack of results. This would address the problem head-on. Another scenario is one of a self-sustaining V-shaped economic recovery, where what comes down goes up again. If there is not much of a crisis to react to, the failure to react is much less of a problem. In between these two scenarios there is also the possibility that the mood might shift after the crisis. The desire to put the crisis behind could well inspire a new renaissance in Europe. 

We have explained in previous instalments of the series why we think that a quick recovery or a sufficiently large coronabond are extremely unlikely. The economic scenario we are expecting is for a sharp downturn now, to be followed by a stuttering recovery. In theory, the ECB could monetise any amount of debt indefinitely. In practice, there will be constraints on asset purchases, both legal and political. Majorities in the governing council might shift, or an inflationary shock might force the ECB to tighten policy at a time when not all member states are ready. Italy’s strategy is not to wait for elusive coronabonds but to go the national route with the help of the ECB. It works for now, but it is not sustainable in our view. 

We expect the EU to come up with some programmes but, as always, too little, too late. If the coronabond dies, so will the eurobond discussion. The coronabond is where the two conflicting visions since the start of the euro come together. If the coronabond is either rejected or accepted, the debate will end.

But the consequences of that debate are only starting. What we find striking is the sense of disappointment the EU’s response to the crisis has already produced. This is not about face masks, but about EU attitudes in a wider sense. An example is the sudden resignation yesterday of Mauro Ferrari as president of the European Research Council, after only three months in office. He left in protest at the EU’s failure to set up a large-scale scientific programme to fight Covid-19. He called himself a fervent supporter of the EU, but he said the crisis had changed his views.

We have heard this type of sentiment expressed more recently from other Italians. What is the point of the EU? We hear it from Spain too. Europe is losing some of those who have always supported European integration. The irony is that Angela Merkel and Mark Rutte feel that they are showing the utmost in solidarity when they point to the ESM. Rutte, ever so patronising, even talked about a gift. 

With insult and injury you lose people in the political centre as well. Brexit also started as a nationalist minority project, but its campaigners succeeded to co-opt moderates to their cause. 

We don’t expect a formal break-up of the EU even in that scenario. More likely, the damage will come from within. Our expectation is that a coronabond disappointment will bring many EU policies and projects to a near standstill. Do we still expect Italy to accept an EU budget in which it would be a net contributor? Do we think that Italy or Spain would be constructive players in the upcoming conference on the future of Europe? Or support the EU’s climate policies with the same fervour as before, when domestic unemployment is higher than ever? It will become rational for both countries to strengthen strategic relations with China. Do we really think that a disillusioned south will make the EU more coherent on the world stage?

The debate on coronabonds is often couched in moralistic terms. To us, the issue is not only whether they are right or wrong on its own terms, but the implications for the future of the EU. The two are linked.  

Italy’s decoupling from the European mainstream may already have started last December, when Giuseppe Conte held up the transformation of the ESM into a full EU institution. Expect more obstruction. Italian politicians have smartened up. They no longer threaten euro exit. But remember: just as there are financial instruments that could replicate a eurobond, there are financial instruments that could replicate a euro exit.

Our expectation is that the north will not change its position on debt mutualisation unless and until vital economic interests are at stake. That does not appear to be the case now. We see a potential problem of time inconsistency. When the moment arrives, it may be too late.  

Louis de Bernières, a British novelist, said it was the EU’s handling of the Greek crisis that turned him into a Brexiteer. It was a moral choice. We thought the EU lost its soul when it agreed to pay Turkey to keep refugees away. Like so many others, we too started out as admirers of European integration and supported the EU and its institutions without reservation. We, too, find this is getting harder.

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